UK: Treasury plans for euro failure

The Telegraph ^ | 12/26/2011 | Philip Aldrick

[bruinbirdman]

The Government is considering plans to restrict the flow of money in and out of Britain to protect the economy in the event of a full-blown euro break-up.

The Treasury is working on contingency plans for the disintegration of the single currency that include capital controls.

The preparations are being made only for a worst-case scenario and would run alongside similar limited capital controls across Europe, imposed to reduce the economic fall-out of a break-up and to ease the transition to new currencies.

Officials fear that if one member state left the euro, investors in both that country and other vulnerable eurozone nations would transfer their funds to safe havens abroad. Capital flight from weak euro nations to countries such as the UK would drive up sterling, dealing a devastating blow to the Government’s plans to rebalance the economy towards exports.

Earlier this year, Switzerland was forced to peg its currency to the euro to protect the economy after a massive appreciation in the Swiss franc due to spiralling fears over Europe.

The plans emerged as Spain’s new finance minister Luis de Guindos warned the country’s economy was set for negative growth in the last quarter.

Speaking yesterday he warned the next two months “are not going to be easy”.

Britain’s response to the possible break up of the euro would reflect measures taken by Argentina when it dropped the dollar peg in 2002, according to sources.

In addition to the risk of an appreciating currency, dealing with potential UK corporate exposures to the euro poses a considerable challenge for the Treasury.

Britain’s top four banks have about £170bn of exposure to the troubled periphery of Greece, Ireland, Italy, Portugal and Spain through loans to companies, households, rival banks and holdings of sovereign debt. For Barclays

[expat1000]

Good planning. They have also started planning for airlifting out a million Brits in Spain when the Euro crashes and the Spanish banks close.

Foreigners always get the worst treatment in disaster situations - especially man-made disasters. They can’t vote so nobody cares about them and the politicians have their hands full with irate constituents already. Even if the banks are open foreigners will not be able to get their money out when the Euro goes down the tubes.

[sten]

ya know what would be useful for the UK at this time?

all that gold Blair sold off @ $250/oz