Britain is preparing continguency plans for the end of the eurozone, it was revealed today

Tuesday January 17,2012
By Emily Fox for

THE British government is preparing for the worst in the event of the eurozone collapsing, it was revealed today.

The Government is undertaking “extensive contingency planning” to prepare for any further chaos in Europe, peers were told.

Treasury minister Lord Sassoon said the planning was aimed at dealing with “all potential outcomes of the eurozone crisis”.

At question time, he said Britain wanted to see a “strong and dynamic” eurozone and European economy.

But he stressed it was for the eurozone countries to “take the lead in supporting the euro as a currency”.

Lord Sassoon also indicated that Britain would be prepared to stump up more cash to tackle the crisis if the IMF requested it.

“The Government sees the role of the IMF to support individual countries and not to support currencies.

“If the IMF puts forward a case, as it may well do, for an increase in its resources, if there is a strong case the UK will, as it has always done in the past, support the IMF in increasing resources as required,” he said.

Tory former chancellor Lord Lawson of Blaby said: “There is only one thing as worrying as the collapse of the eurozone and that’s the continuation of the eurozone.”

He said it has been shown to be “fundamentally flawed and the cause of all these problems”.

Lord Lawson said ministers needed to look at the risk of a banking meltdown, adding: “If it should prove necessary for the UK Government to rescue any British banks, they should do so on much tougher terms than the ludicrously soft terms which the previous administration used.”

Lord Sassoon said ministers had a lot to learn about the “softness” with which the previous Labour government went about a lot of things.

He said the lesson was that the Government must stick to a deficit reduction programme that was “firm and fair”.

Labour’s Lord Grenfell, who worked for the World Bank for 30 years, said it was extraordinary that the ratings agencies “disclaim all responsibility for the impact on borrowing costs of their downgradings”.

He demanded: “Do these unaccountable agencies just not care whether or not the impact of what they do is likely to hamper and jeopardise the eurozone recovery?”

Lord Sassoon said the credit ratings agencies had a “useful and important part to play in the good working of the financial markets” and refused to comment on individual judgments made over recent weeks.

UKIP’s Lord Pearson of Rannoch said there were only two ways forward: full fiscal union or a return to national currencies.

He said a recent Merrill Lynch report suggested an orderly return to national currencies in Europe “need not be nearly as traumatic as the political classes would have us believe”.

Lord Sassoon said it was fundamentally in the UK’s interests to see a strong and healthy eurozone.

“Crisis in the eurozone presents the most imminent threat to growth in this country.”

Labour’s Lord Peston, a former economic adviser to the Treasury, asked why the Government still did not “forthrightly support the maintenance of the euro” and accused ministers of “dragging their heels” in dealing with the issue.

Lord Sassoon told him: “The UK Government wants to see a strong and dynamic eurozone and European economy.”

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