Britain is not immune to the crisis that is crashing through Europe. More than half of Britain’s trade is with the European Union (EU). Now Italy’s economy is reaching a tipping point. And this is making for some very nervous bankers in the City of London.
Britain’s four biggest banks hold a total of £42 billion in Italian debt. Royal Bank of Scotland, which is still publicly owned, has a £9.7 billion exposure.
But it’s not just Italy that the Tories and the bankers are worried about. The spread of the euro crisis means that no state can pretend to sit this out.
David Cameron also faces an internal political problem. He wants to be a big shot power broker inside the EU. But he also has to reassure the Tory right that Britain won’t help fund a European bailout.
So far that means Britain won’t be backing the European Central Bank’s emergency fund. But instead it will pay more to the International Monetary Fund to deal with the crisis.
Either way public money is being funnelled into the coffers of European banks facing bad debts. The danger to Britain is too real for Eurosceptism to dominate economic policy at this stage.
Even though Britain is not in the eurozone, it cannot pretend to be above the chaotic fray breaking out there. The economies and banking systems of Europe are simply too entangled with each other.
The collapse of Italy could trigger even greater defaults in France and elsewhere. The scale of British bank exposure then would be catastrophic. That is the nightmare prospect haunting the British ruling class.
The Tories are quick to adopt a lecturing tone, telling their European counterparts to put their houses in order.
George Osborne told the new governments in Greece and Italy that they “need to show they can implement the tough measures required to deal with their debts and make their economies more competitive”.
Yet the Tories face a dilemma. They want to claim their policies are keeping Britain back from the brink. They want to blame the eurozone for any bad news on growth or unemployment.
But at the same time they want to use the threat of potential economic catastrophe to vindicate ever harsher austerity.
Greece clearly shows that austerity is not a solution to the crisis. We must not let the Tories use the eurozone crisis to launch an ideological offensive to justify their attacks on the public sector.
There is an alternative. We can make the resistance shown by Greek workers contagious. A massive turnout for the strikes on 30 November would be the first step down this road.