LONDON - The Treasury is working on contingency plans for the disintegration of the single currency that include capital controls. The preparations are being made only for a worst-case scenario and would run alongside similar limited capital controls across Europe, imposed to reduce the economic fall-out of a break-up and to ease the transition to new currencies. Officials fear that if one member state left the euro, investors in both that country and other vulnerable eurozone nations would transfer their funds to safe havens abroad. Capital flight from weak euro nations to countries such as the UK would drive up sterling, dealing a devastating blow to the Government’s plans to rebalance the economy towards exports. Earlier this year, Switzerland was forced to peg its currency to the euro to protect the economy after a massive appreciation in the Swiss franc due to spiralling fears over Europe. The plans emerged as Spain’s new finance minister Luis de Guindos warned the country’s economy was set for negative growth in the last quarter.
Access Investments-Building Awareness - European Union-ROMANIA
Tuesday, December 27, 2011
Contingency plans ...
LONDON - The Treasury is working on contingency plans for the disintegration of the single currency that include capital controls. The preparations are being made only for a worst-case scenario and would run alongside similar limited capital controls across Europe, imposed to reduce the economic fall-out of a break-up and to ease the transition to new currencies. Officials fear that if one member state left the euro, investors in both that country and other vulnerable eurozone nations would transfer their funds to safe havens abroad. Capital flight from weak euro nations to countries such as the UK would drive up sterling, dealing a devastating blow to the Government’s plans to rebalance the economy towards exports. Earlier this year, Switzerland was forced to peg its currency to the euro to protect the economy after a massive appreciation in the Swiss franc due to spiralling fears over Europe. The plans emerged as Spain’s new finance minister Luis de Guindos warned the country’s economy was set for negative growth in the last quarter.
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4 comments:
3 seconds ago
scare scare scare!!!!
turkey has defaulted 6 times in the last 100 odd years....
and guess what?
the country still exists.people go to work,others visit+some invest!
and cmd is in love with them!
the quicker the euro dies the lower the losses will be.
first cut is the cheapest,eh jon ?
5 minutes ago
Calm down and try to think of the differences in the two situations. I doubt if Spaniards are going to be chasing British tourists down the streets waving machetes. Mind you, I've been wrong before.
The contingency plans here will be more like the UK Government chartering normal commercial aircraft and guaranteeing payment to the operators.
Come on. Let's not be too silly.
21 minutes ago
'Capital controls can only be used in an emergency to impose “quantitative restrictions” on inflows, which would require agreement of the majority of EU members.'
You're having a laugh - if any country decides this is necessary, they're not going to wait around for an EU meeting so they can ask Juncker and Barroso and Merkozy 'if that's OK'.
The record amount comes despite the ECB lending 523 eurozone banks a total of €489bn in cheap loans last week in an attempt to keep credit flowing through the economy and prevent a full-scale credit crunch.
Banks borrowed the money at the ECB's benchmark rate of 1pc, but receive an overnight rate of just 0.25pc, well below what they could earn in wholesale markets.
This means lenders are depositing any new cash at a loss in order to guarantee safety.
Banks will also be searching for safe havens in an attempt to reduce their risk profile for end-of-year accounts, as was seen during the end of 2008.
The ECB data came as a leading think tank warned that the ongoing eurozone crisis could send Britain into a double-dip recession.
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