Osborne Says U.K. Is Ready for a ‘Traumatic’ Greek Euro Exit

Chancellor of the Exchequer George Osborne moved to reassure investors and voters that the U.K. has taken steps to insulate itself from a “traumatic” Greek exit from the euro.

“Britain’s attitude to the developing Greek crisis is clear, we hope for the best but we prepare for the worst,” Osborne told lawmakers in the House of Commons in London on Monday. “We should plan on the assumption that this referendum will effectively be a choice for the Greek people about whether their country now leaves the euro.”

His comments add to the pressure from European policy makers who are framing the July 5 referendum as an in-or-out vote on euro membership rather than on the terms of rescue aid. The Greek government plans to ask voters whether they accept the latest proposal by creditors on implementing budget cuts in return for more financial aid, and advocates a “no” vote.

Greece has shut its banks and imposed capital controls to help avert the collapse of its financial system amid increasing concerns it will be forced out of the euro area. Banks will be closed at least until July 6.

Osborne said he had spoken to the International Monetary Fund, his European counterparts and Bank of England Governor Mark Carney to ensure tourists, businesses and British retirees living in Greece are protected.

The U.K. government and the BOE are ready to ensure Britain’s financial stability, Osborne said. State payments including pensions to about 6,000 British citizens in Greece will continue to be made in the usual way, he said.

‘Breathing Space’

The 150,000 British tourists who visit Greece each week in an average July should take cash with them to cover the cost of their stay, Osborne said, rather than risk limits on the money they can access in the country.

Osborne also said the U.K. tax authorities would provide “breathing space” to businesses who are experiencing cash-flow difficulties as a result of the Greek crisis.

Greece “has been one of the biggest external economic risks to the British economy,” Osborne said. “I don’t think anyone should underestimate the impact that a Greek exit from the euro would have on the European economy -– and the knock-on effects on us.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE