Chancellor George Osborne held a round of urgent calls on the financial crisis from his Californian holiday home, including one to Mervyn King, the governor of the Bank of England, in which the two men agreed that the eurozone countries needed to move more quickly to set up the new euro-support structure agreed at their summit a fortnight ago.
Osborne also urged Italy and Spain to show that they will force through credible deficit reduction plans. In an attempt to dispel the suggestion that key ministers were complacently underplaying the crisis by staying on holiday, the Treasury gave a briefing on a round of calls made by Osborne, including one with the prime minister, on holiday in Italy.
David Cameron also spoke to German chancellor Angela Merkel by phone to gauge the German reaction to the crisis.
The Germans expressed anger that European Commission president José Manuel Barroso had suggested that fresh steps were needed beyond those agreed at the crisis summit on July 21.
The British focus is on seeing existing plans implemented, including empowering the European financial stability facility to buy bonds in the secondary market, offer precautionary credit lines and lend to recapitalise banks. The treasury minister, Justine Greening, admitted the developing crisis may make it harder for the government to meet its deficit reduction targets. She said: "Clearly the challenge we've got of getting our public finances back into order, rebalancing the economy and getting it back on track and creating jobs is now set against a very difficult global economic backdrop."
The most senior cabinet minister on duty, foreign secretary William Hague, insisted Britain was "not in the firing line", but convened an unscheduled stocktake with officials to assess the damage being done to Britain's banks.
The business secretary, Vince Cable, insisted the crisis would not damage the public finances, adding Britain is seen as a safe haven. He said: "Our banks have been made safer, there's a much stronger regulatory system in place and there's absolutely no reason why anybody should panic."
The shadow chancellor, Ed Balls, intervened, writing on the Guardian's Comment is Free site: "The idea that Britain – which has not grown for the last nine months and whose markets have fallen in the last 48 hours – is a safe haven or 'out of the firing line', as the foreign secretary William Hague claimed today, is not only complacent but patently absurd.
"The government needs to recognise that what we need in Britain, and across Europe, is a plan for growth. Without growth it will not be possible to get deficits down in a sustainable way. That is why the IMF and the government's own watchdog, the Office for Budget Responsibility, have issued warnings in recent days."
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