16:20 01Dec11 RTRS-BREAKINGVIEWS-The real UK plan B: protecting against euro chaos
(The authors are Reuters Breakingviews columnists. The opinions expressed are their own) 
     
   By Hugo Dixon and George Hay 
   LONDON, Dec 1 (Reuters Breakingviews) - Pundits say Britain needs a plan B to boost growth. What it really needs is a contingency scheme to handle a euro explosion. The central planks should be for the government to keep adequate fiscal firepower in reserve to handle a crisis and to shore up the country's banks. 
   The two points are linked. If the government used all its fiscal headroom now in an attempt to prevent a double-dip recession, it might find it had no capacity to react if things go from bad to worse across the English Channel. Debt is already forecast to peak at 78 percent of GDP in 2014/2015, according to the Office for Budget Responsibility. But that assumes the euro zone finds a solution to its problems. If not, the UK will be dragged into a deep recession and its debt will balloon: the tax take would fall, social expenditure would rise and money would be pumped into the banks. 
   If the single currency breaks up, there will probably be banking panics across the euro zone. Britain's lenders would also be vulnerable. That's partly because they hold 15 billion pounds of the sovereign debt of Greece, Portugal, Italy, Spain and Ireland. But the main problem would be their 144 billion pound exposure to those countries' private sectors. A euro collapse would turn many good loans bad. Royal Bank of Scotland <RBS.L>, Barclays <BARC.L> and Lloyds Banking Group <LLOY.L> would be the three banks most in the firing line. 
   Extra capital alone wouldn't stop these banks running out of cash in the aftermath of a breakup. The government and Bank of England would also need to provide them with a liquidity backstop, as they did in 2008. As then, support could have two elements: the Treasury could guarantee new issues of wholesale bank debt; and the BoE could restart its Special Liquidity Scheme, which allowed lenders to swap illiquid assets for government bonds for a period of three years. 
   One option would be to wait until a breakup before doing any of this. But the UK might then find itself on the back foot, having to fight a full-blown panic. It would be better to get at least part of the contingency plan moving now. 

     
       CONTEXT NEWS 
   -- UK banks should limit distributions and seriously consider raising external capital in the coming months, the Bank of England recommended in its latest Financial Stability Report on Dec. 1. 
   -- The BoE said it had advised the Financial Services Authority to encourage banks to firm up their balance sheets. This should be done, it said, without exacerbating market fragility or reducing lending to households and businesses, a reference to over-zealous deleveraging. 
   -- The BoE also advised that the FSA should require banks to disclose leverage ratios as part of their regular reporting no later than the start of 2013. 
   -- HSBC <HSBA.L>, Lloyds Banking Group, Barclays and Royal Bank of Scotland held 14.8 billion pounds of Greek, Spanish, Portuguese, Italian and Irish sovereign debt at the end of September. They also held 144.3 billion pounds of non-bank private sector debt, according to the BoE. 
   -- If the UK government decides to help bank funding by reintroducing its Credit Guarantee Scheme and the BoE's Special Liquidity Scheme it would be better off doing so sooner rather than later, a source from one of the large UK banks told Reuters Breakingviews. That would avert the impression of panic in the event of a euro zone breakup, the source said. 
   -- George Osborne, Britain's Chancellor of the Exchequer, said on Nov. 29: "We are now undertaking extensive contingency planning to deal with all potential outcomes of the euro crisis".   
   -- BoE Financial Stability Report:  http://www.bankofengland.co.uk/publicat … /fsr30.htm 
   -- Reuters: BoE urges UK banks to bolster capital buffer [ID:nL5E7N1377]     

   -- For previous columns by the author, Reuters customers can click on [DIXON/] and [HAY/] 
   (Editing by Peter Thal Larsen and Sarah Bailey) 
   ((george.hay@thomsonreuters.com))     
Keywords: BREAKINGVIEWS BRITAIN/PLANB
   

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Thursday, 01 December 2011 16:20:04RTRS [nL4E7N12WN] {EN}ENDS

В пятницу же в Париже должна состояться встреча премьер-министра Великобритании Дэвида Кэмерона с президентом Франции Николя Саркози.

Днем ранее, выступая с Нажать программной речью о состоянии европейской экономики, Саркози заявил, что "Европу нужно основать заново". В частности, французский президент говорил о необходимости принятия нового документа, который бы помог странам еврозоны поддерживать финансовую дисциплину.

Лондон озабочен этим заявлением, так как в результате такой реорганизации влияние Великобритании в Евросоюзе может существенно снизиться.