The German chancellor will travel to Washington for a key G8 summit with other world leaders, including Britain's prime minister and Barack Obama, as fears mount that the euro is on the brink of collapsing.
Angela Merkel will come under pressure on Friday to use German taxpayers' money to help rescue struggling European countries, including Greece and Spain, by underwriting their debts.
The German chancellor will travel to Washington for a key G8 summit with other world leaders, including Britain's prime minister and Barack Obama, as fears mount that the euro is on the brink of collapsing.
David Cameron took the unusual step on Thursday of setting out a three-point plan to save the single currency to stop Europe's financial problems spiralling out of control.
He recommended the issue of so-called Eurobonds, which would effectively mean that debts incurred by one country in the single currency are shared throughout the eurozone. This involves German taxpayers underwriting debts throughout the continent.
The crunch talks at the G8 summit in Camp David, the American President's official retreat, came as:
— Downing Street admitted the National Security Council has been drawing up plans to prevent "civil strife" in Britain if the euro collapses. Plans are also thought to have been drawn up to evacuate Britons from Greece if the economic crisis leads to serious rioting.
— Fears grew about the Spanish economy as a leading bank was forced to deny a run on deposits, its stock market plummeted and the government faced higher borrowing costs at a bond auction.
— The credit ratings of Greek banks were cut again as rumours circulated that some branches were limiting cash withdrawals.
— Jose Manuel Barroso, the president of the European Commission, insisted Europe was prepared to "do all it takes" to ensure Greece stays in the euro.
— Alexis Tsipras, the Left-wing Greek radical hoping to win next month's elections, said severe spending cuts were a path "directly to hell" and that Italy and Spain would be forced out of the euro if Greek has to leave.
Last night, Cameron took part in a conference call with Francois Hollande, the new French president, Merkel, and Mario Monti, the Italian prime minister, in which they "explored new options" to solve the crisis.
The Prime Minister will hold his first face-to-face talks today in America with Hollande, whose anti-austerity agenda has spooked financial markets.
In a speech yesterday, Cameron said: "We all need to address Europe's overall low productivity and lack of economic dynamism, which remains its Achilles' heel. Most EU member states are becoming less competitive compared to the rest of the world, not more."
In the past, Cameron has caused irritation by appearing to lecture European countries on how they should solve their debt problems.
However, he gave a blunt warning to Germany that its taxpayers may need to take on more risk by allowing the issue of Eurobonds. Merkel is opposed to the bonds and the move is deeply unpopular in Germany.
In Washington Cameron will hold talks with Obama and other world leaders about tapping into emergency oil reserves in an effort to drive down petrol prices.
Cameron will also push for a new US-EU trade deal to lower import taxes.
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