British chancellor: "Moment of reckoning" for Europe this summer

(CBS News) Will the European financial crisis drag America back into recession?

In an emergency measure, Britain is moving to defend itself. The Treasury pledged the equivalent of $150 billion to keep money flowing.

Europe is the biggest economy in the world; 17 countries use the currency called the euro, but several are nearly broke. There's danger that a failure would trigger a financial crisis like we saw in 2008.

That's the warning from the man who works at 11 Downing Street in London, next door to the prime minister. George Osborne is the top treasury official. He told CBS News Europe must create a common banking system so strong countries can support the weak. He talked to CBS Evening News anchor Scott Pelley about what he's been telling Europe's leaders.

GEORGE OSBORNE: The messages they're getting from myself, from the U.S. administration, and from others are very, very clear that this is an exceptionally grave moment for the whole world economy.

SCOTT PELLEY: An exceptionally grave moment for the world economy. Help the folks at home understand what the stakes are here.

GEORGE OSBORNE: Well, I think the stakes are very high. I think we might be plunged back into the kind of financial problems we saw in 2008 if we don't have a resolution of the euro crisis. And in a way, we've seen that movie already. And we didn't like it.

SCOTT PELLEY: What has to happen to stabilize Europe, in your estimation?

GEORGE OSBORNE: Well, I think what has to happen is, in effect, what Alexander Hamilton understood a couple hundred years ago in the United States, which is if you have a single currency then you need to have a national debt. You have treasury bills. There needs to be something like that in the euro zone. We need to have some confidence that bank depositors in Spain and other countries have their deposits protected by the rest of the euro zone.

SCOTT PELLEY: Deposit insurance like we have in the United States.

GEORGE OSBORNE: Deposit insurance. These are big decisions. I mean, this is all about moving more in the direction of a political union. It doesn't have to be a United States of the euro zone. But it has to move more in that direction. And whilst they dither and delay in getting to that point, the U.S. is suffering, the U.K. is suffering, the rest of the world is suffering, and, of course, the peoples of Spain and Greece and all these other countries are suffering, too.

SCOTT PELLEY: How much time do they have?

GEORGE OSBORNE: Well, I don't think they have very long. I mean, I'm not gonna put a timetable on it but I...

SCOTT PELLEY: Weeks? Months?

GEORGE OSBORNE: Well, I think you're gonna see over this summer a moment of reckoning. I think you're gonna see a moment when the euro zone have to decide. Are they gonna stand behind their currency? Are they gonna stand behind all 17 members of that currency? Or are they gonna allow, for example, Greece to leave the euro? One thing is clear: The worst thing for the world would be a Greek exit without a plan to deal with the contagion, because that would be like letting Lehman Brothers go and not having a plan for the day after.

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