Cost of Greek Exit From Euro Put At $1Trillion! UK Government Making Urgent Preparations To Cope With The Fallout !
- The Greek contagion is spreading to the PIIGS. We are seeing more bank runs and in Spain too!
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Cost of Greek exit from euro put at $1tn!
by Lary Elliott, Jill Treanor and Patrick Wintour ,The Guardian
UK government making urgent preparations to cope with the fallout of a possible Greek exit from the single currency
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The British government is making urgent preparations to cope with the fallout of a possible Greek exit from the single currency, after the governor of the Bank of England, Sir Mervyn King, warned that Europe was “tearing itself apart”.
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Reports from Athens that massive sums of money were being spirited out of the country intensified concern in London about the impact of a splintering of the eurozone on a UK economy that is stuck in double-dip recession. One estimate put the cost to the eurozone of Greece making a disorderly exit from the currency at $1tn, 5% of output.
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Officials in the United States are also nervously watching the growing crisis: Barack Obama on Wednesday described it as a “headwind” that could threaten the fragile American recovery.
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In a speech in Manchester before flying to the United States for a summit of G8 leaders, the British prime minister, David Cameron, will say the eurozone “either has to make up or it is looking at a potential breakup”, adding that the choice for Europe’s leaders cannot be long delayed.
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“Either Europe has a committed, stable, successful eurozone with an effective firewall, well capitalised and regulated banks, a system of fiscal burden sharing, and supportive monetary policy across the eurozone, or we are in uncharted territory which carries huge risks for everybody.
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“Whichever path is chosen, I am prepared to do whatever is necessary to protect this country and secure our economy and financial system.”
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Officials from the Bank, the Treasury and the Financial Services Authority are drawing up plans in the expectation that a Greek departure from monetary union – increasingly seen as inevitable by financial markets – could be as damaging to the global economy as the collapse of Lehman Brothers in September 2008.
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With a second election in Greece called for 17 June, King dropped a strong hint that the Bank would take fresh steps to stimulate growth if policymakers in Europe failed to deal with the sovereign debt crisis.
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“We have been through a big global financial crisis, the biggest downturn in world output since the 1930s, the biggest banking crisis in this country’s history, the biggest fiscal deficit in our peacetime history and our biggest trading partner, the euro area, is tearing itself apart without any obvious solution,” he said.
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