November 8, 2011
London has contingency plan for collapse of euro, says Cameron
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MARK HENNESSY, London Editor
BRITAIN: MAJOR PLANNING has been carried out by the treasury and Britain’s other financial regulators, including the Bank of England and the Financial Services Authority, on the likely impact of the collapse of the euro, British prime minister David Cameron said.
In the House of Commons yesterday, Mr Cameron refused to detail the preparations in place. “We must put in place contingency plans for any of these countries leaving the euro zone. For obvious reasons, if you start describing what you might have to do, you could set off all sorts of chain reactions.”
However, he warned eurosceptics against wishing for the departure of Greece from the euro: “We should be very careful in recognising that countries leaving a single currency can cause all sorts of knock-on effects and problems for other economies, including our own.
We shouldn’t see this as some sort of painless, easy option for a country to fall out of the euro. It would have very real consequences for other countries, including our own,” he told MPs during a report to the Commons on last week’s G20 summit in Cannes.
Mr Cameron was questioned by MPs on his plans to increase the UK’s backing to the International Monetary Fund if it has to give additional help to euro zone countries – though he insisted it would stay under the £40 billion ceiling already approved by the Commons in July.
He rounded on Labour leader Ed Miliband, who ordered his MPs to vote against the July measure – even though it had been one of the outcomes of the 2009 G20 summit when Labour’s Gordon Brown was in charge.
“They are saying to euro zone countries who contribute to the IMF that you are never, ever allowed to seek its assistance. If they meant this, I would take it seriously, but this is all about politics. They are putting the politics ahead of the economics,” Mr Cameron said.
However, the departure of a member state from the single currency could pose more than one crisis for the prime minister, since he acknowledged that a treaty change would have to be made to legitimise such an exit – which would prompt Conservative MPs to demand a return of powers from Brussels.
“There is nothing in the treaties that allows a euro zone member to leave the euro zone, yet stay in the European Union. My sense is were it to happen [then] some sort of allowance would be made. It would involve at some stage a treaty change to make sure that it was legal,” he said. Conservative eurosceptic MP Edward Leigh questioned Mr Cameron’s and chancellor of the exchequer George Osborne’s backing for greater euro zone fiscal union, saying that it had “been a cardinal feature of British foreign policy for 300 years to avoid a concentration of political and economic power on the Continent”.
“How then is it in our interests to facilitate the creation of a fiscal and monetary union which will have enormous powers over us without us having influence over them?” said Mr Leigh, to loud murmurs of support from the Conservative benches.
Mr Cameron said: “We are suffering at the moment from a single currency that we are not a member of, but that has some serious structural issues and faults. It is in our interest that those faults are resolved. One way of helping to resolve those faults would be for a greater pooling of fiscal sovereignty amongst people in that single currency.”
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