Eurozone collapse a plausible scenario, ministers warned

Ministers should draw up plans to deal with a collapse of the eurozone “as a matter of urgency”, a high-powered committee of MPs and peers warned today.

The joint committee on the UK government’s National Security Strategy (NSS) described the full or partial collapse of the single currency area as a “plausible scenario”.

The consequences, it said, could include the outbreak of “domestic social or political unrest” and a surge of economic migrants within the European Union. Further international economic instability could even leave the UK “unable to afford to defend itself”, with governments across the EU forced to slash defence spending, it added.

In a wide-ranging report, the committee – whose members include former MI5 director general Baroness Manningham-Buller – said Britain may have to re-think its relationship with the United States, as Washington realigned its strategic priorities.

While the committee welcomed the government’s decision to publish the NSS alongside the 2010 Strategic Defence and Security Review, it said that it had so far failed to produce “a clear over-arching strategy”.

It dismissed the assertion in the NSS that the UK did not face any loss of power or influence as global economic activity shifted to Asia and Latin America as “wholly unrealistic”.

“We believe that, even in 2010, the potential threat to UK security from a full, or partial, collapse of the eurozone was one of the plausible scenarios which a prudent NSRA (National Security Risk Assessment) should have examined,” the committee said.

“We call on the NSC (National Security Council) to address the potential impacts on the UK and Nato were this to happen, as a matter of urgency.”

The committee said that the government also needed to “reflect deeply” on the implications for Britain of the policy shifts taking place in the US as Washington turns its focus away from Europe.

The committee said: “It raises fundamental questions if our pre-eminent defence and security relationship is with an ally who has interests which are increasingly divergent from our own.”

The committee said the UK would have to accept a more “partnership-dependent” role in world affairs.