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No 10 talks on Greek economy crisis

Prime Minister David Cameron has met senior officials from Whitehall and the Bank of England to discuss the possible impact on the UK economy of continuing instability in Greece.

The hour-long meeting in the Cabinet room at No 10 came amid continuing speculation about potential Greek default on debts or exit from the eurozone.

Downing Street stressed that the overwhelming majority of Greek debt is held by eurozone institutions, not by Britain, and that reforms since the previous crisis in 2012 may have lessened the vulnerability of other European countries to a shock from Greece.

But Mr Cameron's official spokesman said: "There do remain risks around contagion and uncertainty and so it is important to look at all of those."

Joining Mr Cameron for today's contingency planning meeting were Treasury permanent secretary Sir Nicholas Macpherson and senior officials from the Business Department, Foreign Office, Cabinet Office and the Bank of England's financial regulation team.

The Prime Minister's spokesman said they discussed "the risks of pressures in financial markets as potential uncertainty grows" and agreed it was important for the UK to be "vigilant" to the possibility of knock-on problems caused by the instability in Greece.

The meeting came after Chancellor George Osborne said Britain was "stepping up" planning to deal with any escalation of the crisis. The Chancellor was absent as he was travelling to a meeting of G20 finance ministers in Turkey, which is set to be dominated by the situation in Greece.

Greece's new prime minister Alexis Tsipras - elected last month on an anti-austerity platform - is calling for a new debt deal to ease the burden on his country but insists he does not want to pull out of the euro.

But former US Federal Reserve chairman Alan Greenspan said it is only "a matter of time" before Greece is forced out of the single currency.

Mr Tsipras has conducted a tour of European capitals to reassure eurozone leaders about his plans, and will meet Mr Cameron for the first time at a European Council summit in Brussels on Thursday.

In his first speech to the Athens parliament as prime minister, he called last night for an end to "bailout barbarity" and promised to press ahead with election promises to supply free food and electricity to those worst affected by the economic crisis, increase the minimum wage and reinstate public sector employees.

Mr Osborne warned yesterday that Greek exit would cause "real ructions" and "real instability in financial markets in Europe" and said he would urge fellow G20 finance ministers to "resolve this crisis".

Mr Cameron was updated by officials on the political situation in Greece and the possible impact of instability on the UK, and agreed that contingency planning should continue to be stepped up, said Downing Street.

His spokesman said it was "important to be vigilant to the risks of contagion", but stressed important differences with the 2012 crisis, including the fact that bond yields on the debts of countries such as Portugal, Ireland and Spain are not so high.

"Things have changed since 2012 and there are some obvious differences, " said the spokesman.

"We have had new financial regulation procedures led by the European Central Bank, the ECB has in recent weeks announced its approach on bond-purchasing and quantitative easing, and we have had reforms undertaken in a series of countries - in Greece, but also countries such as Portugal, Ireland and Spain, who were under particular pressure in 2012 as well.

"We have the clear positions from the new Greek government about staying in the eurozone and the comments from eurozone countries around maintaining that eurozone unity. We need to underline the determination of the eurozone countries and Greek government have signalled with regard to the euro.

"But we need to look at the risks of pressures in financial markets as potential uncertainty grows, as clearly there are difficult discussions going on between the Greek government and the eurozone countries and in that context, we need to look across the full range of issues."

Asked whether the City of London was exposed to uncertainty in Greece, the Prime Minister's spokesman said: "Greek bonds are overwhelmingly held in the eurozone because the ECB has been providing capital and liquidity into Greek financial institutions.

"Clearly there are global economic interdependencies and London is a major global financial centre, so it is something we need to be vigilant about."

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