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30th Jul 2021

UK treasury pondering death of the euro

  • The British parliament as seen across the river Thames. Hoban: 'I am not going to comment on whether the eurozone will remain intact' (Photo: Paul Vallejo)

The UK's treasury minister has - during a cut-and-thrust debate in parliament - admitted that London is preparing for a potential break-up of the eurozone.

The 47-year-old junior minister made the controversial comments while under fire from Conservative Party MPs and opposition Labour Party members in Westminster on Monday (20 June) about the implications for the British economy if Greece goes bust.

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He began by saying: "I am not going to engage in speculation on what might or might not happen ... Members will agree that it would not be appropriate for me to discuss the detail of those scenarios."

He then neglected on several occasions to make a positive statement of British confidence in the survival of the eurozone.

The most virulent prediction of the euro's demise came from Labour MP Jack Straw, a former foreign minister, who said: "Instead of sheltering behind complacent language and weasel words that we should not speculate, the government should recognise that this eurozone cannot last ... Since the euro in its current form is going to collapse, is it not better that that happens quickly rather than it dying a slow death?"

Responding to another question about the possible "domino effect" of a Greek bankruptcy, Hoban later admitted: "Discussions are taking place between the Bank of England, the Treasury and the FSA [Financial Services Authority], and we are considering a number of scenarios and potential market events."

Toward the end of the session, he added: "I am not going to comment on whether the eurozone will remain intact. Clearly, this crisis demonstrates the huge strain that the eurozone is under."

On Greece itself, Conservative and Labour MPs were united in their belief that the new bail-out under discussion in Brussels will fail.

John Redwood, a member of the Conservative Party's policy group on economic competitiveness, said: "Greece went bankrupt more than a year ago, but the ministers of certain countries cannot believe it and are wasting taxpayers' money on trying to pretend that it has not happened."

For his part, Labour MP Denis MacShane voiced concern about "a new flood of [Greek] economic migrants [coming] into Britain." Labour's Mike Gapes said the EU's "sado-monetarist programmes" - on further Greek austerity cuts - will not work.

Hoban added that if Greece goes bust British banks will lose $4 billion (€2.8 billion) in terms of sovereign bonds, French banks $16 billion and German banks $20 billion. But Jack Straw noted that if all forms of debt are included, British banks would lose €13 billion, French ones €34 billion and German ones €53 billion.

Commentators remarked that Hoban's statements do not represent official British policy on the future of the eurozone so much as his personal weakness in debate.

Andrew Gimson, writing for the British daily The Telegraph, said: "Hoban behaved like an Englishman who finds himself at the scene of a traffic accident involving a number of reckless foreign drivers, and wishes to pretend he has seen nothing."

James Forsyth, writing in The Spectator magazine, noted: "Hoban's performance today did nothing to assuage concerns that the coalition is chronically under-prepared for the consequences of what is going on in the eurozone."

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