David Cameron demanded proof that Britain is ready for a eurozone catastrophe yesterday as he held an emergency summit on the crisis.
The Prime Minister summoned Bank of England Governor Sir Mervyn King and Financial Services Authority chairman Lord Turner to No 10 to ensure the UK has contingency plans in place.
Mr Cameron set up the meeting amid fears that the Spanish banking system is on the edge of disaster, potentially plunging Europe into a financial cataclysm.
Downing Street insisted the hour-long meeting had long been planned, but City sources said it was not one of the Governor and FSA’s regular No 10 visits.
The Governor and FSA chief briefed Mr Cameron on the resilience of British banks and measures being taken to insulate the UK economy from the risk of contagion spreading from bankrupt Greece to other economies.
Crucially, the summit was attended by Deputy Prime Minister Nick Clegg, as well as Chancellor George Osborne and Chief Secretary to the Treasury Danny Alexander.
Mr Clegg would not normally attend financial meetings outside the Budget period.
The meeting came as a banking crisis in Spain raised the prospect of the eurozone’s fourth largest economy requiring an international bailout.
Summoned: The Governor of the Bank of England, Mervyn King (left) and the chairman of the Financial Services Authority, Adair Turner
Spanish prime minister Mariano Rajoy admitted the situation was ‘extremely difficult’ as shares in the stricken lender Bankia crashed 27 per cent in early trading in Madrid after it requested a £15billion state bailout.
By the end of trading, the Spanish stock market had fallen 2.2 per cent to its lowest level for nine years as banking heavyweights including Santander followed Bankia down.
Borrowing costs in Spain have also soared back into the danger zone. The ten-year bond yield, the interest the government pays to borrow, jumped to 6.5 per cent – the highest since November last year and close to the 7 per cent level that triggered bailouts in Greece, Ireland and Portugal.
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