The Bishop of Bath and Wells has warned that moves to cut public spending and secure financial stability are not enough to save Europe from its economic woes.

Speaking in the House of Lords yesterday, the Rt Rev Peter Price said there was a need to protect and promote truly free and open markets within the European Union.

Unless governments tackle imbalances across Europe and embrace structural reform of the region’s economic model, the bishop warned of a “damaging outbreak of protectionism across Europe”.

Too little is being done to boost growth across Europe, he continued, while sovereign and banking defaults look increasingly “unavoidable”.

The bishop went on to question the effectiveness of the austerity measures being taken across Europe.

“A crisis that started on Europe’s periphery has been allowed to grow into a threat to the core of the eurozone and the future of the European project itself,” he said.

“Measures taken across Europe appear to invite economic stagnation and political dislocation, the effects of which can be seen on even the marbled steps of St Paul’s.”

With populism, nationalism and Euroscepticism on the rise, the bishop said there was no guarantee that popular opinion would allow politicians to carry out policies to stabilise Europe’s finances and stimulate economic growth.

His greatest fear, however, is the emergence of a “two-speed Europe” that will fracture the single market.

“We need to be wary that the new bailout mechanisms agreed at last week's euro summit do not sideline either the European Commission or the European Parliament,” Bishop Price told peers.

“A flawed single market that encourages protectionist measures cannot be either in Britain's best interests or in those of Europe.

“A more protectionist Europe will result in slower growth, thus fuelling the electoral fortunes of populist parties.

“A more fractured single market will see Britain disengage yet further from Europe, a retrograde step in the hard fought fight towards peace and prosperity for our region.”

His warning came as G20 leaders met in Cannes for a summit that was dominated by the eurozone crisis.

The summit ended today without a clear agreement from G20 leaders on pumping more cash into the IMF.

David Cameron said that although it was in Britain’s interests to support the IMF, Britain would not be contributing to more eurozone bailouts.

He said it was for Greece to decide whether to stay in the eurozone and accept the rescue package on offer.

“What they can’t do is string this out endlessly,” he said.

“The world can’t wait for the eurozone to go through endless questions and changes about this.”