Mr Cameron and his senior ministers met Sir Mervyn King, Bank of England governor, and Lord Turner, the City's top regulator, to discuss the worsening outlook.
The discussions came as investors recoiled at a €19 billion rescue of Bankia, the Spanish lender, sending the country’s borrowing costs over Germany’s to the highest level since the start of the euro, even as Mariano Rajoy, the prime minister, insisted the country’s banks did not need an international rescue.
Ministers are drawing up their own contingency plans; the Foreign Office is considering how it would help British tourists in Greece if the cashpoints ran dry and if disruption to ferry services left them stranded on Greek islands. Theresa May, home secretary, has not ruled out some kind of suspension of the EU’s free movement rules if a crisis spreads across the eurozone triggering large-scale migration, according to her aides.
So far there has been little sympathy and plenty of scepticism over Madrid’s insistence that it will rescue its faltering banking sector without outside support. Some senior officials and EU ministers see Spain’s reluctance to tap EU funds as mainly a political obstacle, generated by the Rajoy government unnecessarily staking its reputation on avoiding a bailout.
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