The Chancellor George Osborne said that Portugal is being “bailed out at huge costs to [its] population”
George Osborne has said the worsening debt crisis in Portugal shows the government was right to prioritise cutting the UK’s deficit.
The chancellor said Portugal’s bailout showed it could not “convince the world” it was able pay its own debts.
Coalition plans for cutting borrowing – including large spending cuts – were widely supported abroad, he said.
And he accused Labour, which argue the cuts are damaging growth, of playing “Russian roulette” with the economy.
In a speech to the British Chambers of Commerce, Mr Osborne said Portugal’s request for an international bailout – following the same path as Greece and Ireland last year – would come at a “huge cost” to its population.
None of these countries had been able to convince the financial markets that they were able to get on top of their debts, he said.
“Those in our country who deny the urgent need to deal with our deficit are playing Russian roulette with Britain’s national sovereignty”
George Osborne ChancellorEU to discuss Portugal bail-out
In contrast, he argued the UK’s deficit cutting plan – which includes £81bn of spending cuts over the next four years – was “a crucial bedrock to stability at home and commanded near universal confidence abroad”, he argued.
“If you hear the stories about the cuts and still wonder why our country needs to take these difficult decisions, then look at what is happening around us. First Greece, then Ireland, today Portugal. All of them countries that did not convince the world they could pay their debts…
“Today of all days you can see the risks which would face Britain if we were not dealing with our debts. The risks are not imaginary. They are very, very real”.
And he turned his fire on the opposition and other critics of the government’s economic strategy.
“Those in our country who deny the urgent need to deal with our deficit are playing Russian roulette with Britain’s national sovereignty,” he said.
But the chancellor gave no details of how much the UK may have to contribute to a bailout of Portugal amid claims the sum could be as high as £4bn.
The UK is obliged to contribute to an EU-wide emergency rescue fund agreed by the finance ministers of all 27 EU nations at the peak of the Greek debt crisis last May.
The UK is also committed to backing an IMF support package for Portugal should it be needed. However, it is not liable for a separate rescue fund limited to members of the eurozone using the single currency.
UK Independence Party leader Nigel Farage has called for an urgent statement on the bailout in the European Parliament, while the Conservative leader in Brussels and Strasbourg said the UK should boycott any moves to prop up the Portuguese economy.
“We wish the eurozone well in rescuing Portugal’s economy but the UK cannot and should not play a part in the EU bailout,” MEP Martin Callanan said, stressing there were sufficient funds in the eurozone fund to cover all eventualities.
“British voters will not accept that at home we are making tough but fair savings only to send money to countries that should never have been allowed to join the Eurozone in the first place.”
David Cameron said recently he was “frustrated” that the UK was financially obliged to support bailouts of Eurozone members and he had taken steps to ensure this would no longer happen when current arrangements were revised in 2013.
Senior ministers have been in dispute with their Labour predecessors about how the UK came to back the EU financial stabilisation mechanism. The decision was taken by former Chancellor Alistair Darling on the weekend after last year’s inconclusive general election and before the new coalition government had come to power.
Tory MP Douglas Carswell has asked the Information Commissioner to publish the advice given to current ministers about the issue, saying the “full implications of nodding through the small print on those first few days in office are becoming apparent”.
The BBC’s Economics Editor Stephanie Flanders said the UK’s contribution to the international bailout was likely to be relatively small.
The government has conceded the UK may be liable for the measure but has stressed that the sums will be much lower than those given to Ireland where the UK also provided £3.25bn in bilateral aid.
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