UK's Telegraph: Prepare for riots in euro collapse, Foreign Office warns

Brits are preparing for "when", not "if", euro collapses.

From The Telegraph (11/26/2011):

British embassies in the eurozone have been told to draw up plans to help British expats through the collapse of the single currency, amid new fears for Italy and Spain.

As the Italian government struggled to borrow and Spain considered seeking an international bail-out, British ministers privately warned that the break-up of the euro, once almost unthinkable, is now increasingly plausible.

Diplomats are preparing to help Britons abroad through a banking collapse and even riots arising from the debt crisis.

The Treasury confirmed earlier this month that contingency planning for a collapse is now under way.

A senior minister has now revealed the extent of the Government’s concern, saying that Britain is now planning on the basis that a euro collapse is now just a matter of time.

“It’s in our interests that they keep playing for time because that gives us more time to prepare,” the minister told the Daily Telegraph.

...

The EU treaties that created the euro and set its membership rules contain no provision for members to leave, meaning any break-up would be disorderly and potentially chaotic.

If eurozone governments defaulted on their debts, the European banks that hold many of their bonds would risk collapse.

Some analysts say the shock waves of such an event would risk the collapse of the entire financial system, leaving banks unable to return money to retail depositors and destroying companies dependent on bank credit.

The Financial Services Authority this week issued a public warning to British banks to bolster their contingency plans for the break-up of the single currency.

Some economists believe that at worst, the outright collapse of the euro could reduce GDP in its member-states by up to half and trigger mass unemployment.

Analysts at UBS, an investment bank earlier this year warned that the most extreme consequences of a break-up include risks to basic property rights and the threat of civil disorder.

“When the unemployment consequences are factored in, it is virtually impossible to consider a break-up scenario without some serious social consequences,” UBS said.

(Full article at the link.)

There are prominent fund managers who have been counting on the premise that TPTB would never let the euro collapse in a disorderly way, and have invested rather heavily in the sovereign debts in the euro zone. One of them, MF Global, decided to gobble up the Italian debt, and ended up blowing itself up along with retail investors including US farmers who were using MF Global for their commodity hedging.

It is surely an interesting time. The currency blowing up in Europe, reactors blew up in Japan, the US attacking an uneasy ally (Pakistan) while a Black Friday shopper uses pepper spray to gain advantage over the other shoppers.

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