UK ministers have prepared emergency measures to prevent a flood of money transfers into the UK and an influx of people heading to Britain for shelter from Europe chaos if the euro currency was to collapse.
UK financial experts fear that the collapse of the euro would lead to the widespread movement of both people and money, with potentially damaging consequences for Britain if left unchecked.
Over the last few weeks the mass media have been publishing various forecasts for the destiny of the eurozone and its currency. The experts are trying to answer the questions: What awaits the common currency if some eurozone members leave Europe’s financial union? What will be the Euro exchange rate in 2012? The forecasts vary in different aspects – from general issues to specific figures.
It is not a secret that some companies, banks and even governments start working out contingence plans in case the eurozone does eventually disintegrate.
The British Treasury has drawn up contingency plans to prevent investors shifting huge sums of cash money transfers from the Eurozone to Britain amid fears it could lead to a surge in the value of UK sterling foreign exchange rates.
And it emerged yesterday that Britain’s borders could also be temporarily sealed against economic refugees from Europe if the collapse of the euro currency sparks widespread civil unrest on the Continent.
The UK Foreign Office is also working on contingency plans for the emergency evacuation of thousands of British expats and holidaymakers from stricken countries.
Officials insist the plans are being drawn up as a precaution, and do not indicate that the Government believes the collapse of the single currency is imminent.
Can The Euro Survive 2012?
Despite repeated attempts by Eurozone countries to prop up the single currency, many experts believe the 17 member euro currency cannot survive the coming year intact.
British officials believe that one or more countries, such as Greece and Portugal, could be forced to drop out of the single currency in order to tackle the dire problems in their own economies.
UK Ministers fear the break up of the euro currency could have a devastating effect on Britain, dashing hopes of a recovery and sending the economy back into recession.
Anecdotal reports suggest some wealthy investors and individuals from countries like Greece are already transferring money to the UK and buying property in London.
The Treasury, which has a central role in drawing up contingency plans for the euro’s collapse, believes a break-up could send international investors scrambling for a safe haven.
The transfer of huge sums of money to London could send foreign exchange rate of UK Sterling (GBP) soaring, threatening to crush the fragile recovery in exports which is central to the Coalition’s plans to ‘rebalance’ Britain’s economy.
Swiss Franc Safe Haven – Money Transfers
Earlier this year the Swiss government was forced to intervene after nervous investors transferred money there from the Eurozone, sending the value of the Swiss Franc to unsustainable levels.
The Swiss authorities moved to peg the Swiss franc currency to the euro, currently at 1.2 Swiss francs as a floor.
The UK Treasury is planning a different approach which will impose strict limits on the amount of money that can be transferred in or out of the UK.
Treasury officials are also drawing up plans to deal with the impact on Britain’s major banks, which have a combined exposure of £170 billion to the troubled economies of Greece, Ireland, Portugal, Italy and Spain.
Elsewhere in Whitehall there are fears that a collapse of the euro currency could lead to widespread civil unrest and even spark a flood of economic refugees.
Some countries are expected to ground all flights and effectively seal their borders to prevent the flight of people and money. British officials are said to be considering contingency plans to seal the UK’s borders in a worst-case scenario, although any attempt to prevent the free movement of people is illegal under EU law.
The Ministry of Defence has also been put on standby to help rescue British nationals stranded in countries that are plunged into chaos.
Other EU countries are also drawing up contingency plans. Earlier this month reports in Portugal said the country’s borders would be temporarily sealed if the country drops out of the single currency.
Strict limits would be imposed on cash withdrawals and euro notes would be stamped with an escudo mark until the new currency was printed and distributed.