Britain's Foreign Office Prepares For Riots In Europe. Sees Euro Collapse "When, Not If"

Zero Hedge ^ | 11/26/2011 | Tyler Durden

[SeekAndFind]

As every major developed economy hits Bass's Keynesian Endgame, the status quo is set to change dramatically. Nowhere is this climax playing out louder than in Europe and the implicit solution of Germany-uber-alles (while seemingly inevitable though nevertheless lengthy in execution) is likely to not sit well with many of the EMU nations.

To wit, The Telegraph today reports that Britain's Foreign Office is advising its overseas embassies to draw up plans to help expats should the collapse of the Euro turn explosive. Almost incredibly, a senior minister has revealed that Britain is now planning on the basis that a euro collapse is matter of time.

The Telegraph: Prepare for riots in euro collapse, Foreign Office warns:

____________________________________________

British embassies in the eurozone have been told to draw up plans to help British expats through the collapse of the single currency, amid new fears for Italy and Spain.

As the Italian government struggled to borrow and Spain considered seeking an international bail-out, British ministers privately warned that the break-up of the euro, once almost unthinkable, is now increasingly plausible.

Diplomats are preparing to help Britons abroad through a banking collapse and even riots arising from the debt crisis.

The Treasury confirmed earlier this month that contingency planning for a collapse is now under way.

A senior minister has now revealed the extent of the Government’s concern, saying that Britain is now planning on the basis that a euro collapse is now just a matter of time.

“It’s in our interests that they keep playing for time because that gives us more time to prepare,” the minister told the Daily Telegraph.

Recent Foreign and Commonwealth Office instructions to embassies and consulates request contingency planning for extreme scenarios including rioting and social unrest.

Greece has seen several outbreaks of civil disorder as its government struggles with its huge debts. British officials think similar scenes cannot be ruled out in other nations if the euro collapses.

Diplomats have also been told to prepare to help tens of thousands of British citizens in eurozone countries with the consequences of a financial collapse that would leave them unable to access bank accounts or even withdraw cash.

Fuelling the fears of financial markets for the euro, reports in Madrid yesterday suggested that the new Popular Party government could seek a bail-out from either the European Union rescue fund or the International Monetary Fund.

There are also growing fears for Italy, whose new government was forced to pay record interest rates on new bonds issued yesterday.

The yield on new six-month loans was 6.5 per cent, nearly double last month’s rate. And the yield on outstanding two-year loans was 7.8 per cent, well above the level considered unsustainable.

Italy’s new government will have to sell more than EURO 30 billion of new bonds by the end of January to refinance its debts. Analysts say there is no guarantee that investors will buy all of those bonds, which could force Italy to default.

The Italian government yesterday said that in talks with German Chancellor Angela Merkel and French President Nicolas Sarkozy, Prime Minister Mario Monti had agreed that an Italian collapse “would inevitably be the end of the euro.”

The EU treaties that created the euro and set its membership rules contain no provision for members to leave, meaning any break-up would be disorderly and potentially chaotic.

If eurozone governments defaulted on their debts, the European banks that hold many of their bonds would risk collapse.

Some analysts say the shock waves of such an event would risk the collapse of the entire financial system, leaving banks unable to return money to retail depositors and destroying companies dependent on bank credit.

The Financial Services Authority this week issued a public warning to British banks to bolster their contingency plans for the break-up of the single currency.

Some economists believe that at worst, the outright collapse of the euro could reduce GDP in its member-states by up to half and trigger mass unemployment.

Analysts at UBS, an investment bank earlier this year warned that the most extreme consequences of a break-up include risks to basic property rights and the threat of civil disorder.

“When the unemployment consequences are factored in, it is virtually impossible to consider a break-up scenario without some serious social consequences,” UBS said.

[hinckley buzzard]

My gut says something is looming on the horizon but what would it actually mean for the Euro to "collapse?" Money would no longer buy anything? Prices would go astronomical?" Governments would no longer pay employees, pensions, etc?

I really don't know but wonder what the day to day effect on the average citizen would be, and most of all, why. Any insights anyone?

[Apollo5600]

I can imagine Europe being pretty much doomed. But what does that mean for the United States? A collapse of a bunch of our banks?

[rbg81]

Any bailout these countries will just go to financing the status quo—nothing will change. Which, in turn, means that they’ll fritter it away and be back for another one within the year.

Modern politicians seem incapable of solving problems because to REALLY solve these problems means that they’ll pi$$ people off and won’t get re-elected. Frankly, I expect the charade until the foolishness is wrung out of the electorte. Unfortunately, that won’t happen until the social order starts to break down.

And that especially goes for the US too.

[Jack Hydrazine]

I had a rabbi tell me not long after the intro of the Euro that it would not last. How he knew I don’t know but he must have seen some fundamentals that weren’t put into place before it was rolled out.

[EternalVigilance]

"When, Not If"

This is always true of the inevitable collapse of socialism.

[DonaldC]

All systems break down eventually.

[353FMG]

>>I can imagine Europe being pretty much doomed.<<

.
If that also gets rid of the muzzies it will be a resurrection for Europe.

[BobL]

“My gut says something is looming on the horizon but what would it actually mean for the Euro to “collapse?” Money would no longer buy anything? Prices would go astronomical?” Governments would no longer pay employees, pensions, etc?

I really don’t know but wonder what the day to day effect on the average citizen would be, and most of all, why. Any insights anyone? “

I suspect that they will have to immediately devalue the currency by some ratio. So, in effect, prices for everything will go up by some factor, maybe double or triple...that’s what they’ll see. At the same time, their wages will not budge much, and their savings will not change at all - so they’ll have a good chunk of their wealth wiped out. That’s the end-result.

The part that Britain is worried about is the transition to that new-normal. If done in a collapse, there will be some period of time where the currency may be worthless and that people will have to barter, use dollars, or use gold. For people without resources, they will get desperate.

By the way, I expect the same here, given our debt level. In our case, the key is to be prepped up, to get through those very difficult transition weeks.

[jersey117]

Look where Europe is now. Yet we have a “president” advocating those same socialistic policies. What a moron.

[Capt. Tom]

Unfortunately, that won’t happen until the social order starts to break down. And that especially goes for the US too.

The reaction to a breakdown of the USA should be different than other countries because the citizens here are armed. - Tom

[jjsheridan5]

Any insights anyone?

These are just guesses, but ...

Much of the welfare net would crumble (due to a rush out of the euro). While in some sense this is good, there is far too much dependency on that net for it to be peaceful. Banks will fail, and there will be some level of long-term credit crisis. The depth of that crisis will go a long way towards dictating how bad it actually gets there. If it turns into a credit collapse, where banks aren't lending to each other, and companies can't get short term credit, then look out. The economy will for the most part come to a complete stop.

The euro will collapse in value, making imports prohibitively expensive. But, at the same time, there will be a shortage of that same currency, due to the collapse in credit. This combination may very well mean that the Euro won't be widely accepted, even within Europe. Obviously, countries would have to issue new currencies, but given the widespread chaos, this will be a significant challenge.

To the average person this translates into: a loss of employment, a loss of savings (either through weakening of the Euro, or simply because the banks can't give them their money), a slashing of asset prices (probably with foreigners picking over the carcass), a lack of availability of non-essentials -- basically, real poverty (as opposed to the American style cell phone/cable/brand new vehicle, kind of poverty).

The only good news for them is that they will still be able to watch Japan crumble, and, because misery loves company, they won't feel all alone.

[GlockThe Vote]

He is not a moron. This is all intentional.

[Billthedrill]

The challenge this time isn't how to prevent the collapse, it's how best to address it so that as few people as possible get hurt. That was the choice facing Bush, and he sold a piece of whatever conservative soul he had left to pump $400 billion into a "soft landing" which, unfortunately, was soft enough to protect the principal offenders from having to change their behavior, and, worse, provided cover for his successor to quadruple the bet for his own purposes. But agree or not, that's why he did what he did.

Now Europe, and the stakes are far higher. Can economic cooperation, the "collectivizing" of risk, and the judicious printing of paper money ease the fall? We saw what happened when Bush tried it and the answer is that there probably isn't enough surplus left in the system to do that even as poorly as his administration did. We can, however, make things worse. Perhaps allowing a hard failure is worse, but whether it is or not, we're running out of options.

[Oatka]

I really don't know but wonder what the day to day effect on the average citizen would be, and most of all, why. Any insights anyone?

Seriously, I think there will be a rush to the dollar that will ease things here. That being said, the derivatives thingy is a sword over the "too big to fail" banks - unless the Euros says the collapse is "voluntary" (cough), which would negate paying off the defaults, as they did with Greece.

[The Working Man]

My gut says something is looming on the horizon but what would it actually mean for the Euro to “collapse?” Money would no longer buy anything? Prices would go astronomical?” Governments would no longer pay employees, pensions, etc?

---

My guess is to look at the most selfish thing a nation could do. ie. The Euro is dead! Long live the ‘Drachma, Deutschmark, Franc,’ etc.

Another way of looking at it is all debts made under the Euro are null and void. Only new debt will be acknowledged and as for you holders of Euro debt, So sorry but stuff happens. Just ask the Shareholders and Bond Holders of a Bankrupt company a la General Motors.

[RegulatorCountry]

Has the Euro even fallen to the exchange rate at which it was introduced in 1999, which was par with the US dollar?

If not, this is hyperbole. If it has, take it seriously.

Too many blogsters need to generate hits and the surest way to do so is to hit the panic button, again and again and again. Is the situation bad? Yes it is. Is it as bad as this? Exchange rate with the dollar, please, then the picture will be a little clearer through all the fog of blog.

[EternalVigilance]

Not this one:

Matthew 6

25 “Therefore I say to you, do not worry about your life, what you will eat or what you will drink; nor about your body, what you will put on. Is not life more than food and the body more than clothing? 26 Look at the birds of the air, for they neither sow nor reap nor gather into barns; yet your heavenly Father feeds them. Are you not of more value than they? 27 Which of you by worrying can add one cubit to his stature?
28 “So why do you worry about clothing? Consider the lilies of the field, how they grow: they neither toil nor spin; 29 and yet I say to you that even Solomon in all his glory was not arrayed like one of these. 30 Now if God so clothes the grass of the field, which today is, and tomorrow is thrown into the oven, will He not much more clothe you, O you of little faith?
31 “Therefore do not worry, saying, ‘What shall we eat?’ or ‘What shall we drink?’ or ‘What shall we wear?’ 32 For after all these things the Gentiles seek. For your heavenly Father knows that you need all these things. 33 But seek first the kingdom of God and His righteousness, and all these things shall be added to you. 34 Therefore do not worry about tomorrow, for tomorrow will worry about its own things. Sufficient for the day is its own trouble.

[Always A Marine]

Out of such chaos are popular dictators swept to power, and I don't see why this situation will prove any different.

Europe now faces twin perils: financial collapse in the short term and demographic collapse in the longer term. Once again Europe has become fertile ground for a tough-talking despot to restore immediate order and then begin the deportation and slaughter of a scapegoat population. In this case, Europe's new enemy truly is a threat -- its hostile, non-assimilated Muslim immigrants.

[Mariner]

"Some economists believe that at worst, the outright collapse of the euro could reduce GDP in its member-states by up to half and trigger mass unemployment."

A 50% Debt Deflation combined with Sovereign Default.

That makes for very, very hard times.

For currencies that survive, they will increase in "value" enormously.

Very hard times.