Downing Street and the Treasury have been drawing up measures to control the “serious economic risks” to Britain should Greece default on its debts, or exit the eurozone – or both.
The Prime Minister’s official spokeswoman told reporters at Westminster that the Government was taking “all steps to prepare” for such eventualities.
Treasury officials declined to give details of the plans, but confirmed that Chancellor George Osborne regards a “Grexit” as “a very serious risk” to the economy of both Britain and the wider world.
Central bank warning
The comments came as Greece’s central bank warned for the first time that the country could be on a “painful course” to a debt default and an exit from both the eurozone and the European Union.
According to the most recent figures from the Bank of England, British banks are exposed to Greece to the tune of $12.2 billion (£7.7 billion) on an “ultimate risk basis”. In other words, this is the sum they would lose were the country to go bust completely.
The figure is not large by comparison with UK banks’ exposures to other eurozone countries that have experienced recent difficulties such as Italy, at $40 billion (£25.2 billion) or Spain at $50 billion (£31.5 billion).
But the knock-on effects from a Greek collapse could hammer confidence across the eurozone and beyond.
The British Chambers of Commerce warned that market upheavals caused by “a messy Grexit” could hit many UK businesses and called on central banks and governments to take action to limit disruption “through all means possible”.
Bailout talks continue
Talks continue between the Athens government and its international creditors over an economic reform deal which has held up more than £5 billion in bailout payments needed to allow Greece to continue servicing its debts.
Eurozone finance ministers are meeting in Luxembourg today to try to find a way forward, and the crisis is expected to dominate a European Council summit of EU leaders – including David Cameron – in Brussels next week.
Meanwhile, it has emerged that the Republic of Ireland is making its own plans in the event that the UK votes in an in/out referendum to leave the EU.
Irish foreign minister Dara Murphy told BBC Radio 4’s World At One: “It would be remiss of us [not to], given the possibility that our largest trading partner may be exiting the European Union. That is something we, of course, are looking at.”