DAVID Cameron has met officials from the Treasury and the Bank of England to draw up contingency plans for Greece leaving the eurozone.
Just hours after Alan Greenspan, the former head of the US central bank, predicted a so-called "Grexit", the Prime Minister was engaged in an hour-long meeting in the No 10 Cabinet room as speculation mounted that the impasse between the Athens government and Greece's creditors would lead to a debt default and an exit from the eurozone.
Downing Street volunteered the information about Mr Cameron's emergency meeting and was keen to stress that the overwhelming majority of Greek debt was held by eurozone institutions, not British banks, and that reforms since the previous crisis in 2012 might have lessened the vulnerability of other European countries to a shock from a Greek exit.
But the PM's spokesman noted: "There do remain risks around contagion and uncertainty and so it is important to look at all of those."
He explained that the Downing Street meeting, which involved Sir Nicolas Macpherson, Permanent Secretary at the Treasury, discussed the "risks of pressures in financial markets as potential uncertainty grows" and agreed it was important for the UK to be "vigilant" to the possibility of knock-on problems caused by the instability in Greece.
It is believed the officials told Mr Cameron that while there was still a possibility that Greece could cut a deal with other eurozone members on it staying in the single currency, the chances of the embattled nation reverting back to the drachma had increased. Under this scenario, there would be a major devaluation of the Greek economy, many people would see their savings wiped out and inflation would rise as the weaker drachma struggled against stronger currencies.
The No 10 meeting came after George Osborne said Britain was "stepping up" planning to deal with any escalation of the Greek crisis. The Chancellor was absent from the No 10 meeting as he was travelling to Turkey for a meeting of G20 finance ministers, which is set today to be dominated by Greece's economic plight.
The brinkmanship between Greece and its eurozone partners continued with leftwinger Alex Tsipras, elected last month as the new Greek Prime Minister on an anti-austerity platform, insisting his country would not extend its reform-linked bailout while Germany made clear it would get no more money without such a programme.
Escalating the rhetoric, Yanis Varoufakis, Greece's Finance Minister, predicted the eurozone could collapse "like a house of cards" if Athens were forced out.
The growing confrontation spooked financial markets. The Athens Stock Exchange fell by more than six per cent and Greece's cost of borrowing rose further.
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