Could be. According to this in the Telegraph the UK is panning that this may be the case.
Treasury ministers have admitted that the Government is drawing up contingency plans for a Greek bankruptcy after being warned by a former foreign secretary that the euro “cannot last”.Jack Straw, the former Labour foreign secretary, said that a “quick” end to the single currency was now better than a “slow death”.In an emergency debate, senior MPs from all parties demanded that Britain stand aside from a new rescue package for Greece and push for the country to leave the euro.Mark Hoban, a Treasury minister, admitted that “many scenarios were being considered”. He said it would “not be appropriate” to discuss the detail, but added he would be “guilty of not stepping up to the responsibilities of his office” if plans had not been made to cope with a default.He said British banks had about £2.47billion in outstanding loans to Greek institutions and individuals.
Last night, after leaving a meeting with eurozone ministers in Luxembourg, George Osborne, the Chancellor, insisted that he did not want to see Britain dragged into providing money for a second bail-out.
The UK was never fond of the single currency and had a referendum on it a number of years ago which went down in flames. According to this piece in the Daily Mail collapse of the Eurozone itself is not unthinkable.
Britain is preparing for the collapse of the euro, a Treasury minister warned last night.
If Greece’s debt crisis forces it to quit the eurozone, it would have ‘a very significant economic impact’ on Britain, said Mark Hoban, the Financial Secretary to the Treasury.
Officials said British banks stand to lose £8billion if the Greek economy goes under
It came as former foreign secretary Jack Straw led MPs from all sides in predicting the death of the single currency, warning: ‘Is it not better that it happens quickly rather than a slow death?’
He said the Government should be honest and admit the single currency is on the brink of collapse. He told the Commons: ‘The eurozone cannot last. In its current form [it] is going to collapse.’
The International Monetary Fund also warned that the Greek debt crisis could threaten the stability of the entire eurozone, Britain’s biggest trading partners.
Mr Hoban admitted the Government was preparing contingency plans for a euro meltdown with the Bank of England and the Financial Services Authority.
He refused to say whether ‘the eurozone will stay intact’, a coded reference to Greece ditching the single currency.
But he added: ‘This crisis demonstrates the huge strain the eurozone is under. That’s why it was right for us to stay out of the eurozone.
‘The Treasury, together with the Bank of England and the FSA, are monitoring the financial system, including the euro area, on an ongoing basis. Many scenarios are considered.’
‘Continued instability in the eurozone could be one of the factors that could hold back the recovery of the British economy.’
I myself do not think it’s a matter of whether but when. I wonder if the people in Washington are paying attention ? Since a number of our banks are still up to their eyeballs in this mess that they instigated.
Update: From the Guardian.
The inevitability of default is obvious from the numbers. Greece’s interest costs are so large that any attempt to achieve a balanced budget while staying in the euro would kill demand in its economy, undermine tax receipts and cause more political and social upheaval. The eurozone leaders’ reluctance to accept this is really unwillingness to confront the knock-on effects of default on holders of Greek debt.
But Charles Dumas of Lombard Street Research has a neat answer to the question of how banks would lose from a Greek default: “No more than they will anyhow is the correct answer, and probably less. Grinding Greek noses in the dust is almost certain to increase the present value of future losses.” Dumas thinks Greece should quit the euro and call in the IMF, which, he suggests, would ensure that the Greek default is smaller by a few cents in the euro than it would otherwise be.
There is no mechanism for leaving the euro club, and nobody would pretend that the process would be straightforward. But the current eurozone strategy of lending ever-greater sums to Greece while demanding more austerity has run out of road. Investors do not believe it will produce a happy ending. It is hard to imagine the same investors will see profit in signing up for “voluntary” arrangements to extend the profile of Greek debt.
But investors may be more prepared to believe contagion can be contained if the eurozone gets serious about finding ways to support its banking system when the Greek debt crisis can no longer be deferred. Unfortunately, there are few signs so far that the politicians are ready to make the mental leap.