Deep in the Treasury’s recently-refurbished offices, the Government’s finest economic brains are having to think the unthinkable.
They are preparing emergency advice for Chancellor George Osborne on how to respond to the collapse of the single currency and financial contagion spreading across Europe with dire consequences for Britain.
Vince Cable, the Business Secretary, warned yesterday of the danger of this country being hit by an “Armaggedon” scenario, although he added: “We’re not there yet.”
David Cameron stressed he wanted to eurozone to remain intact, but said: “We have to keep the British economy safe, to take the British economy through this storm. That means preparing for all eventualities.”
Forecasting what might happen to the economy has always been a key part of the Treasury’s role, but the job has acquired far greater urgency since the banking crisis of 2008.
The Eurozone’s demise is the most extreme outcome being modelled by the Treasury’s number crunchers – led by Tom Scholar, its Second Permanent Secretary, - in “game planning” sessions with the Bank of England and the Financial Services Authority.
They are also liaising with the Foreign Office, which is reporting on the political developments in Eurozone nations, and Dr Cable’s Business Department.
Checks have already been made on the exposure of banks to such nations as Greece, Italy and Spain. If the worst happens, will they need some fresh injection of cash to ensure they can keep lending?
Under another scenario, one or more euro members could drop out of the currency club. Whichever those countries might be, there would be implications for Britain.
For instance, the Business Department is already working on advice to small companies with large order books in the Mediterranean. If Greece reverts to the drachma, what does that mean for contracts signed in Euros?
Mr Cameron’s official spokesman said: “The Treasury always does contingency planning. It monitors the risks out there and thinks about how we would deal with, and mitigate, those risks.”
The Labour leader, Ed Miliband, called yesterday for EU leaders to stage an emergency meeting this weekend – and not be allowed to leave until a “comprehensive solution has been put in place for the crisis”.
Mr Cameron's spokesman responded: “I don’t think it is a question of more meetings. What we need is more action.
* The Bank of England yesterday said it was maintaining interest rates at their record low of 0.5 per cent for the 32nd consecutive month.