The British government is stepping up contingency planning to prepare for the “serious economic risks” posed by a Greek default and a possible exit from the euro, Downing Street has confirmed.



As David Cameron prepares to discuss the Greek crisis with the prime ministers of Italy and Luxembourg on Wednesday, No 10 confirmed the government was planning for the impact on businesses, banks, the financial sector and tourism. The chancellor said on Tuesday the UK government was taking “all steps” to protect Britain.

Whitehall officials, who held contingency planning meetings on the implications of a possible Greek exit from the euro in February, have stepped up their preparations in recent weeks amid fears that Greece could be on the verge of a debt default.



Eurozone finance ministers are due to discuss the crisis on Thursday, but there is little sign of a breakthrough after the Greek prime minister, Alexis Tsipras, denounced its creditors’ demands on Tuesday. He accused the International Monetary Fund of having “criminal responsibility” for the damage caused to Greece, and insisted the country needed debt relief to help it recover.



Greece has just a few days to reach an agreement before its current bailout expires on 30 June. Without a deal, Athens cannot access about €7.2bn of loans, which have been frozen while negotiations over pension reforms and tax rates have ground on.

Later on Wednesday, the European Central Bank must decide whether to keep providing the emergency liquidity that allows Greek banks to keep operating. The ECB has already pumped about €82bn into the system. Worried savers have been withdrawing hundreds of millions of euros each week, sending deposits levels down to their lowest level in over a decade.

Austria’s chancellor, Werner Faymann, expressed support for the Greek people on Wednesday morning before travelling to Athens to meet Tsipras. He criticised some of the measure demanded by Greece’s lenders, declaring: “I stand on the side of the Greek people, who in this difficult position are being proposed more things detrimental to society.”

The prime minister’s official spokesman said on Wednesday: “The chancellor was talking in the house [of Commons] yesterday about the potential exit of Greece and how that presents serious economic risks and of course as part of that we take all steps to protect ourselves from such eventualities ... You will expect we are continuing to make sure we have the right plans in place and stepping up operations given where discussions have got to. We don’t go into the specifics of these plans but of course they will be looking at how do we make sure we have looked at the impacts on business, the banks and the financial sector and tourists ....

“This is about making sure we are as prepared as we can be. Of course, the potential default does present some serious economic risks, so alongside contingency plans it is about making sure we have an economy that is growing and that our public finances are in good order.”

Asked whether the contingency plans covered just British exposure to Greece or the risk of wider contagion, she said: “You would expect us to have plans in place that look at a range of potential consequences.”

She said she was not aware of any change in the Foreign Office advice for people travelling to or living in Greece.

The Whitehall contingency planning meetings have focused on the immediate impact of capital controls in Greece – limits on bank withdrawals – that could be introduced to avoid a bank run if Greece appears to be moving towards a default on its debts. There is a particular focus on the tens of thousands of British holidaymakers who travel to Greece during the summer.



The Whitehall officials, from the Treasury, the Foreign Office and other government departments, have also examined the longer-term impact on the British financial system on the instability that would be triggered across the eurozone by a Greek default.

This could be followed by a Greek exit from the euro, which would plunge the single currency into its greatest crisis, threatening a financial crisis in Britain’s main trading partner.

A Greek exit from the euro would have an immediate impact on companies and banks owed money in Greece. A convulsion in the eurozone - the UK’s largest trading partner - would have a detrimental impact on the UK economy. Exporters fear the shock would spread way beyond Greece at a delicate time for the world economy, leaving them struggling to find new markets to sell their goods.



Osborne told MPs: “Out in the real world there are some serious economic risks, not least the risk that we see growing in Greece of a potential default and exit from the euro. People should not underestimate the damage that that would do to financial confidence.

“Of course, in the UK we take all steps to prepare for and protect ourselves from such eventualities, but the best thing that a government can do is to ensure that it is living within its means, that it has a productive economy and that its public finances are in good order. That is what we are going to deliver in this parliament.”

Cameron will discuss the Greek crisis when he meets his counterparts from Italy and Luxembourg, founding members of the euro, in separate meetings. The prime minister will meet Matteo Renzi in Milan before flying to Luxembourg for dinner with Xavier Bettel, who takes over the EU’s rotating presidency on 1 July.

The meetings are the latest phase of the UK prime minister’s talks with fellow EU leaders on his desire to restructure the union before a European summit on Thursday and Friday next week. But the talks risk being overshadowed by the looming Greek crisis.

Downing Street confirmed that the Greek crisis would be discussed. “It will be an opportunity to hear from Renzi about how he views the Greek situation and the prospects for resolving that before the end of June deadline,” Cameron’s spokeswoman said.

European leaders are making plans for an emergency summit on Sunday if eurozone finance ministers fail to reach a deal at a meeting in Luxembourg on Thursday over a €1.6bn (£1.15bn) debt repayment Greece is due to make to the IMF by the end of June.



Jean-Claude Juncker, the president of the European commission, reflected the anger in Brussels at the way Tsipras has been approaching the deadlocked negotiations by saying he had “sympathy for the Greek people but not the Greek government”. Juncker was until recently rated as one of Tsipras’s only allies.



