Cameron Acknowledges Threats to the Euro But Stresses UK Will Not Help

If Greece defaults and brings down the economies of Europe, including the UK, Cameron will not be able to plead ignorance.

On Tuesday, the UK's Prime Minister, David Cameron, stated that the member states of the eurozone have much "invested in it," according to the BBC.

He went further, claiming that "the consequences of severe turbulence (in the eurozone) could be bad for Britain."

Yet, at the same time, he stated that the UK would not be participating in any financial rescue of Greece.

While his reservations about the UK participating in a new Greek bailout may be valid—Britain is struggling with its own economic problems at the moment—it may ultimately come back to undermine his government.

Cameron and his Conservative party may have been elected by British voters out of a desire to fix Britain's struggling economy. As the economy of the UK seems to have gotten worse under Cameron's watch, a Greek financial contagion could doom his party's chances of re-election.

If Greece defaults, it could bring down economies throughout Europe, as Greek debt and credit default swaps are spread amongst the major banks of Europe. Although the UK does not participate in the euro currency, it is a member of the European Union, and its economy is integrally tied into the economies of eurozone member states.

Thus, the UK may have tremendous exposure to Greece.

Cameron seems to understand this fact, but refuses to help. His stance may doom Britain's economy and Cameron's political future.

Action Items

Bullish: Traders who believe that Cameron is following the right stance and that the British economy will ultimately strengthen under his leadership might want to consider the following trades:

• Buy Currency Shares British Pounder Sterling (NYSE: FXB) in a long play on the GBP. If the British economy strengthens, its currency may appreciate.
• Buy Wisdom Tree Dreyfus Euro (NYSE: EU) in a long play on the euro. If Britain is doing well, the European Union may be doing well. That could be positive for the euro currency.

Bearish: Traders who believe that the Greece debacle will doom the British economy may consider taking positions in the following:

• Pro Shares Ultra Short Euro (NYSE: EUO) is a short play on the euro currency. If the UK does not participate in a Greek rescue package, and the country defaults, it could severely depreciate the currency.
• iShares Silver Trust (NYSE: SLV) is a long play on silver. During times of economic turbulence, gold often does well. Silver, while being more volatile in price, often mimics gold.

Neither Benzinga nor its staff recommend that you buy, sell, or hold any security. We do not offer investment advice, personalized or otherwise. Benzinga recommends that you conduct your own due diligence and consult a certified financial professional for personalized advice about your financial situation.