Britain is threatened by "a tangible possibility of calamity" in the European single currency, the deputy Bank of England governor Paul Tucker warned today.
His warning came as the new euro-zone austerity pact designed to stabilise the currency was thrown off course by Ireland's decision to hold a referendum before signing.
The fiscal treaty is due to be signed by the other members this week at a ceremony in Brussels but Ireland will take at least three months to join, weakening the credibility of strict new borrowing controls.
The European Central Bank was getting ready for another round of cheap loans to Europe's banks, set to top £420 billion. Giving evidence to parliament, Mr Tucker said continuing the euro troubles were already putting up the price of finance.
"Notwithstanding progress, the tangible possibility of calamity in the euro area increases funding costs, even though UK banks have gone some way to strengthening their balance sheets," he told MPs.
