June 5, 2012
Britain could be asked to underwrite up to 4.8-billion towards a bailout of Greece if the country exits the euro.
David Cameron may also face calls for concessions including a referendum on EU membership if a Greek exit prompts a full treaty change, a report by Open Europe said on Monday.
There are growing concerns about the consequences should Athens leave the euro in a so-called “Grexit”, which have escalated in the run-up to the Greek general election on June 17.
Raoul Ruparel, head of economic research at Open Europe, has predicted that the new government in Athens is likely to reach a deal with creditors, allowing the country to remain in the euro temporarily. “As Greece approaches a balanced budget and a more stable banking sector, though still messy, an exit will look increasingly attractive,” he said.
The total cost of supporting Greece if it left the currency could be anything between £55-billion and £211-billion in external and immediate short-term support – in addition to longer-term costs or contagion affecting markets – according to Open Europe.
“This support could potentially be split between the International Monetary Fund (IMF), the eurozone and non-euro countries, with the UK possibly underwriting between £3-billion and £5-billion of the entire rescue package,” the think-thank said.
British taxpayers have so far avoided any direct contribution to the temporary bailout fund, the European Financial Stability Facility and its imminent successor, the European Stability Mechanism.
Cameron has said that he has won assurances from the EU that Britain would not have to contribute to any fresh rescue for Greece.
But Open Europe argues the UK would be likely to take part through the IMF.