Policymakers and firms across Europe are making preparations to cope with a break-up of the single currency, with the president of the Swiss central bank yesterday becoming the latest senior figure to admit to contingency plans for a "collapse" of the eurozone.
"We must be prepared just in case the currency union collapses, although I don't expect that to happen," said Swiss National Bank boss Thomas Jordan. He added that his objective would be to prevent funds flooding into the safe haven of the Swiss franc, which could damage his country's export sector.
Switzerland has already taken an economic hit from appreciation of the Swiss franc over the past year. Last September, the SNB put a cap on the currency's value against the euro to protect exports.
Sterling has also appreciated considerably since the beginning of the year as market fears over the future of the single currency have increased. Bank of England Governor, Sir Mervyn King, said this month that the Bank was preparing contingency plans to cope with a potential major economic shock to the UK economy emanating from the eurozone.
Last week, the European Commission said that it has asked member states to make plans to deal with a potential Greek exit, ahead of a second round of Greek elections on 17 June.
It is not just eurozone officials who are making emergency preparations. The chief executive of Lloyd's of London, Richard Ward, yesterday said the insurance market was also developing contingency plans. "I don't think that if Greece exited the euro it would lead to the collapse of the eurozone, but what we need to do is prepare for that eventuality," Mr Ward told The Sunday Telegraph. "We would switch to multi-currency settlement if the Greeks abandoned the euro and started using the drachma again."
Last week, sources told Reuters news agency that French banks – the most exposed of Europe's banks to a Greek debt default – have stepped up contingency planning. At the end of December 2011, French lending to Greece was $44.4bn (£28.3bn), according to data from the Bank for International Settlements. Meanwhile, Spain will try to shore up confidence in its fragile banking sector this week. On Saturday, the president of Spain's fourth-largest lender, Bankia, said that it would be looking to sell off many of its overseas assets, including stakes in British Airways and Iberia, after it was effectively nationalised last week.
Market concern about the solvency of its banks has exacerbated fears about the solvency of Spain itself since its lenders have been the largest purchasers of Spanish sovereign debt since the turn of the year. Spanish banks are estimated to be holding 30 per cent of the country's debt. Many analysts fear Madrid could become the fourth eurozone state to require a rescue.
More political pressure in the single currency could materialise on Thursday when Ireland holds a referendum on whether or not to approve the new fiscal compact, which has been strongly pushed by Germany as the quid pro quo for its financing of bailouts for weaker member states.
The pact could still come into force if Ireland votes "no", since the ratification of only 12 eurozone countries is needed. But an Irish rejection would still intensify the political and economic turmoil in the single currency.