A European financial transaction tax would be catastrophic for the continent without the participation of countries such as the United States and China, Chancellor George Osborne said on Monday.
European Union policymakers have suggested a tax on financial trading to raise cash for a range of areas from development to bailouts, but Britain has rejected the idea, to safeguard London's position as a global centre of finance.
Proposals for a Europe-only financial transactions tax are a bullet aimed at the heart of London, Osborne said in article for the London Evening Standard newspaper. The ideas of a tax on mobile financial transactions that did not include America or China would be economic suicide for Britain and for Europe.
The EU should be coming forward with new ideas to promote growth, not undermine it.
Osborne said there were more grounds for optimism this week that the euro zone crisis might stabilise, but warned it was still the most dangerous moment for the world economy since Lehman Brothers went down in the autumn of 2008.
He urged Greece and Italy to show the world they could push through austerity measures and called on the euro zone to dramatically increase the firepower of its own bailout funds.
The financial risks of standing behind their currency will ultimately be borne by euro zone citizens. The euro zone has the financial capacity to restore stability. They now need to deploy it without delay, he said.
Wary of the impact on Britain's economy from a break up of the euro zone, Osborne and Prime Minister David Cameron have strongly backed the idea that the zone needs to integrate economic policy further to strengthen its foundations.
Frankly this is a big loss of national sovereignty for those countries ... But it is the only way to make a currency union work for the long term, Osborne said.
Britain will not be part of this fiscal integration, and this government will ensure that our national interests and our voice in the EU are protected.
British government ministers have expressed concern that a tighter-knit euro zone could weaken Britain's standing in the European economy, especially if euro nations started to act in concert in areas of policy that affected the whole of the European Union, such as financial services regulation.
Osborne, who delivers a fiscal policy update to parliament on November 29, said the International Monetary Fund must have enough resources to deal with the world's problems.
Osborne, faced with a faltering economy but firmly resisting calls to soften his own austerity plans, said he would announce reforms to housing and small business lending at the end of the month, as well as an initiative to persuade private sector investors to fund infrastructure projects.
But the biggest single boost the British economy could get would be a resolution of the euro zone crisis, he said.
(Reporting by Matt Falloon; Editing by Toby Chopra)