In Britain, ministers have already overseen extensive contingency planning to prepare for the possible impact of the break-up of the euro. This extends from asking banks to insure their positions in Greece to considering new border controls to prevent a wave of immigration from beleaguered European economies.
A disorderly eurozone break-up could spark another deep recession in this country comparable to that caused by the banking crisis.
Yesterday, Dr Ben Broadbent, a member of the Monetary Policy Committee and former Treasury adviser, said that the Bank of England was ready to intervene.
He said: “Were the still unlikely worst-case risks in the euro area actually to be realised, then our own monetary policy would again play its part in mitigating the impact.”
But he added: “While they are both necessary and effective, these domestic interventions have their limits. It remains the case that, for the time being at least, the most important policy decisions affecting the UK are being taken in other parts of the continent.
“Fears have increased of a rare but bad economic outcome. These heightened fears may already have been affecting the growth of UK activity, investment and productivity for some time.”
However, the economist also indicated that the financial markets may already be over-reacting to events in Europe.
“Markets and businesses possess 'animal spirits’ and can overreact to events,” Dr Broadbent said. “They may have done so again.”
Yesterday, the Greek government announced another €18 billion (£14.4 billion) of funding for the country’s beleaguered banks.
The Spanish government reiterated assurances that it did not require an international bailout, despite this now being seen as inevitable by many financial experts.
