British taxpayers will not have to contribute to a European Union bailout package for Greece, Prime Minister David Cameron has said.
At an EU summit in Brussels, Cameron said he won "assurances" from fellow leaders that Britain should not be made to contribute to any new Greek rescue package.
Some EU countries want to use money from the European Financial Stability Mechanism (EFSM) to help bail out Greece.
Britain is a contributor to the mechanism, and decisions on its use are made by qualified majority voting, meaning there is no UK veto on using its funds, now worthEuro 11.85 (£10.5 billion). Britain’s share of the fund is £1.5 billion.
Cameron said he had been promised that the mechanism will not be used.
"We were not involved in the first Greek bailout, we haven’t been involved in talks about potential Greek bailouts. So I believe it is absolutely right not to use the European Financial Stability Mechanism for future payments in terms of Greece," he said.
Cameron's comments come after a report by Sir Mervyn King's Financial Policy Committee warned that the eurozone debt crisis poses the "most material and immediate threat" to the UK's financial stability.
"Sovereign and banking strains are the most material and immediate threat," the committee, chaired by the Bank of England governor, said in its inaugural report.
The committee called for banks to improve their disclosure of sovereign and bank sector exposure and also warned that authorities needed to keep a closer eye on the explosion of "opaque" products such as exchange traded funds (ETFs), which banks increasingly use to raise funds.
Speaking at a news conference, Sir Mervyn said uncertaintainty over exposure to countries such as Greece could lead to a "crisis of confidence", which posed a bigger risk than direct exposure.
"There is always uncertainty about the scale of exposures, which counter-parties out there are the ones which are heavily exposed," he said.
Sir Mervyn also said that the ongoing crisis in Greece was not a matter of liquidity, but solvency, and a build-up of large amounts of debt:
The report came as EU leaders scramble to avert a Greek debt default that would send shockwaves through international markets.
Greece secured the backing of European leaders late last night for its five-year austerity plan, which Greek ministers will vote on next Tuesday.
Britain's benchmark FTSE 100 index opened up more than 1pc as Greece secured the backing of European leaders late last night for its five-year austerity plan, which Greek ministers will vote on next Tuesday.
Speaking in Prague before flying to Brussels, Prime Minister Cameron said it would be "quite wrong" to ask Britain to contribute to rescuing Greece, while German officials said the stability mechanism should be used.
Mr Cameron will also use the summit to argue that the EU should exempt small firms from new red tape. "This is the right outcome for the British taxpayer," said a Downing Street source.
Earlier this week, aware of the potential domestic outcry if Britain had to stump up billions for Greece, Chancellor George Osborne told fellow EU finance ministers at talks in Luxembourg that the U.K. did not expect to be called upon.
