David Cameron has warned that the Eurozone crisis is likely to hold the UK economy back in the months to come, in a speech to the CBI's annual conference in London.
"Paralysis in the Eurozone is causing alarm in the markets and having a chilling effect on economies in many countries – including our own," he said.
"When the nightly news is about rising interest rates in Europe and uncertainty about the future, it is not surprising that this affects business and consumer confidence."
The PM's speech coincided with the publication of a new strategy to get people on the housing ladder, with a fund which could see the taxpayer underwriting the deposits of 100,000 first-time buyers.
David Cameron also played down figures last week on youth unemployment, pointing out that a quarter of the 1 million young people out of work were full-time students seeking extra income. But he did say that those not in employment, education or training were at risk of becoming a "lost generation".
The Prime Minister suggested George Osborne would have measures to tackle youth unemployment in next week's autumn statement. Cameron wouldn't be drawn on what might be announced, "but I'm sure he'll have something to say about it," he said.
Reiterating the coalition's strategy - that action to reduce the deficit had led to lower rates of borrowing for the government compared to countries like Italy - the PM announced new measures to make sure smaller businesses would benefit from government spending.
"[Government] must become quicker and simpler to sell to – so that small and medium sized businesses don’t get swamped by the cost of bidding. So today we are announcing plans to direct the huge purchasing power of government to the task of strengthening the UK economy," he said.
"While 99% of companies are SMEs - at the moment they win only 6% of procurement spending. And more than that we want to support and strengthen UK-based industrial capability in key sectors where we lack capacity."
Cameron said this would involve fostering better relations with suppliers - "just as the private sector does, and other countries in Europe do."
The Prime Minister's speech to the CBI had been heavily trailed over the weekend. Responding in advance on BBC Radio 4 this morning, Shadow Chancellor Ed Balls warned against believing that Britain's ability to borrow at lower rates than some European countries because of the UK deficit plan was necessarily a good thing.
He told the Today programme: "I think you have to be very careful with these arguments because in the 1990s Japan had very low interest rates for years, it was a lost decade of complete stagnation, their interest rates there were very low because people said: the economy is not growing, inflation is low there is no prospect of rising short term interest rates. The same thing is happening in Britain and in America."Suggest a correction