By . James Chapman and Hugo Duncan . Last updated at 2:33 PM on 15th September 2011 . Britain is drawing up contingency plans for a catastrophic collapse of the euro which experts fear could plunge our economy back into a recession ‘beyond comprehension’. Economists believe the EU would be unlikely to survive a disorderly break-up of the euro and say that even stronger economies could contract by as much as 25 per cent in the aftermath. Amid a mounting sense of inevitability that Greece will default on its massive debts and be forced to leave the single currency, the U.S. urged EU governments to use ‘overwhelming force’ to address the debt crisis. U.S. treasury secretary Tim Geithner, . who will take the unusual step of attending a meeting of EU finance . ministers in Poland tomorrow, admitted Washington had been ‘behind the . curve’ in tackling its own financial crisis but urged Europe to act . decisively. A policeman clashing with an anti-austerity protester near the Italian Parliament building in Rome . Protesters and riot policemen clash in front of the Italian parliament in Piazza Montecitorio . Yesterday . ratings agency Moody’s downgraded the credit ratings of two of France’s . largest banks, Societe Generale and Credit Agricole, because of their . exposure to Greek debt causing panic on French stock markets. The ratings agency left France’s . largest bank, BNP Paribas, on review, saying its profitability and . capital base gave it an adequate cushion to support its Greek, . Portuguese and Irish exposure. World markets rose sharply after European leaders vowed to help Greece avoid default in a bid to sooth trader jitters. The leaders of Greece, France and Germany - in a telephone conference call - agreed Greece was an 'integral part' of the eurozone. And Greece promised to stick to agreements on debt reduction - a condition of the further bailout package from other European nations. The FTSE-100 was up more than 70 points or 1.44 per cent this morning, with the Dax and Cac-40 both up 1.9 per cent. Overnight, Japan's Nikkei rose 1.5 per cent, South Korea's Kospi 0.6 per cent, Hong Kong's Hang Seng 0.5 per cent and Australia's ASX 200 0.8 per cent. Benchmarks in Singapore, Taiwan and New Zealand also rose, although most Chinese stocks were unaffected. Pulling together: Nicolas Sarkozy and Angela Merkel have insisted Greece is in 'integral part' of the euro . Moody's has downgraded Societe Generale and Credit Agricole because of their exposure to Greek debt . Yesterday, U.S. stocks saw their third day of gains in a row. The Dow Jones industrial average rose 140.88 points, or 1.3 per cent. Uri Landesman, president of the New York hedge fund Platinum Partners, said worries over Greece have gone too far because it won't be allowed to default. 'They're just not going to let them [the Greeks] go under,' he said. 'That's just not happening. I think people have learned the lesson from letting Lehman Brothers fail.' Despite today's reassurances, even the most die-hard pro-Europeans appear to accept that the eurozone is in terminal trouble. Former Liberal Democrat leader Lord . Ashdown, a long-time supporter of the single currency, asked in an . interview with The Spectator whether he thought the euro could survive . in its current form, replied: ‘No, I don’t.’ ‘The . most likely outcome is probably a core euro, a euro that has Germany, . Austria, Finland and the Benelux countries in it – you’d have to have . France in there for political reasons, even though economically they . wouldn’t come up to the mark precisely – and maybe Sweden. ‘Then you have a core euro and you then create the institutions to govern the euro.’ Martin Callanan, Conservative leader in Brussels, said: ‘The thing is in absolute crisis. Everybody is panicking over here. ‘And it seems to me the least worst . option is to accept the inevitable for Greece to default on its debt, . leave the euro and devalue its currency and then give it space to . restructure’. But he warned that Britain could be caught in the fallout as the eurozone collapses. Andrew . Lilico, chief economist at analysts Europe Economics, said the collapse . of the euro would almost certainly mean the end of the EU. ‘The . EU is most unlikely to continue without the euro,’ he said. ‘Sudden and . disorderly collapse of the EU would induce a massive further phase of . recession.’ He referred to . predictions by the Swiss bank UBS of a 20-25 per cent contraction in . gross domestic product for strong countries and 50 per cent for weak . countries. ‘I happen to think that the UBS figures are somewhat emotional,’ he said. ‘But it would certainly involve a recession on a scale beyond modern experience or comprehension in a Western democracy.’ In an extraordinary sign of alarm across the globe, five big developing countries said they were ready to discuss bailing out Europe. The leaders of Brazil, Russia, India, China and South Africa – the ‘BRICS’ countries – are to meet at the annual World Bank and International Monetary Fund summit next week to talk about providing emergency assistance. The head of the World Bank said the global economy had entered a new ‘danger zone’ and that the ‘time for muddling through’ was over. Robert Zoellick said: ‘Unless Europe, Japan, and the United States can face up to responsibilities they will drag down not only themselves but the global economy. They have procrastinated for too long on taking the difficult decisions, narrowing what choices are now left to a painful few.’ Treasury sources believe that Germany is now resigned to the eurozone breaking down in its current form and a new European ‘inner core’ being created. There is an increasing expectation that this will mean a new EU treaty. Downing Street confirmed that officials were working on ‘contingency plans’ aimed at trying to insulate Britain from a full-blown crisis in the eurozone, but refused to speculate about what form they would take. Deputy Prime Minister Nick Clegg, in a speech on the economy, warned: ‘The economic context is much worse than before. Yes, facts have changed.’ Shadow Chancellor Ed Balls warned of the danger of a ‘massive economic catastrophe’ on a larger scale than the banking crash in 2008. ‘The issue now isn’t really Greece, it is what is happening in Spain and in particular Italy,’ he said. Polish finance minister Jacek Rostowski, who will chair a meeting of EU finance bosses tomorrow, said the EU could be destroyed by the debt crisis. But the president of the European Commission, Jose Manuel Barroso, insisted that the answer to the growing threat to the euro was a more, and not less, integrated EU.
Stronger economies could contract by 25% if EU falls apart .
Mounting fears Greece will default and have to leave euro .
Moody's downgrades credit ratings of two French banks .
France and Germany insist Greece is 'integral part' of euro .
World markets are boosted but experts are unconvinced .
By . James Chapman and Hugo Duncan . Last updated at 2:33 PM on 15th September 2011 . Britain is drawing up contingency plans for a catastrophic collapse of the euro which experts fear could plunge our economy back into a recession ‘beyond comprehension’. Economists believe the EU would be unlikely to survive a disorderly break-up of the euro and say that even stronger economies could contract by as much as 25 per cent in the aftermath. Amid a mounting sense of inevitability that Greece will default on its massive debts and be forced to leave the single currency, the U.S. urged EU governments to use ‘overwhelming force’ to address the debt crisis. U.S. treasury secretary Tim Geithner, . who will take the unusual step of attending a meeting of EU finance . ministers in Poland tomorrow, admitted Washington had been ‘behind the . curve’ in tackling its own financial crisis but urged Europe to act . decisively. A policeman clashing with an anti-austerity protester near the Italian Parliament building in Rome . Protesters and riot policemen clash in front of the Italian parliament in Piazza Montecitorio . Yesterday . ratings agency Moody’s downgraded the credit ratings of two of France’s . largest banks, Societe Generale and Credit Agricole, because of their . exposure to Greek debt causing panic on French stock markets. The ratings agency left France’s . largest bank, BNP Paribas, on review, saying its profitability and . capital base gave it an adequate cushion to support its Greek, . Portuguese and Irish exposure. World markets rose sharply after European leaders vowed to help Greece avoid default in a bid to sooth trader jitters. The leaders of Greece, France and Germany - in a telephone conference call - agreed Greece was an 'integral part' of the eurozone. And Greece promised to stick to agreements on debt reduction - a condition of the further bailout package from other European nations. The FTSE-100 was up more than 70 points or 1.44 per cent this morning, with the Dax and Cac-40 both up 1.9 per cent. Overnight, Japan's Nikkei rose 1.5 per cent, South Korea's Kospi 0.6 per cent, Hong Kong's Hang Seng 0.5 per cent and Australia's ASX 200 0.8 per cent. Benchmarks in Singapore, Taiwan and New Zealand also rose, although most Chinese stocks were unaffected. Pulling together: Nicolas Sarkozy and Angela Merkel have insisted Greece is in 'integral part' of the euro . Moody's has downgraded Societe Generale and Credit Agricole because of their exposure to Greek debt . Yesterday, U.S. stocks saw their third day of gains in a row. The Dow Jones industrial average rose 140.88 points, or 1.3 per cent. Uri Landesman, president of the New York hedge fund Platinum Partners, said worries over Greece have gone too far because it won't be allowed to default. 'They're just not going to let them [the Greeks] go under,' he said. 'That's just not happening. I think people have learned the lesson from letting Lehman Brothers fail.' Despite today's reassurances, even the most die-hard pro-Europeans appear to accept that the eurozone is in terminal trouble. Former Liberal Democrat leader Lord . Ashdown, a long-time supporter of the single currency, asked in an . interview with The Spectator whether he thought the euro could survive . in its current form, replied: ‘No, I don’t.’ ‘The . most likely outcome is probably a core euro, a euro that has Germany, . Austria, Finland and the Benelux countries in it – you’d have to have . France in there for political reasons, even though economically they . wouldn’t come up to the mark precisely – and maybe Sweden. ‘Then you have a core euro and you then create the institutions to govern the euro.’ Martin Callanan, Conservative leader in Brussels, said: ‘The thing is in absolute crisis. Everybody is panicking over here. ‘And it seems to me the least worst . option is to accept the inevitable for Greece to default on its debt, . leave the euro and devalue its currency and then give it space to . restructure’. But he warned that Britain could be caught in the fallout as the eurozone collapses. Andrew . Lilico, chief economist at analysts Europe Economics, said the collapse . of the euro would almost certainly mean the end of the EU. ‘The . EU is most unlikely to continue without the euro,’ he said. ‘Sudden and . disorderly collapse of the EU would induce a massive further phase of . recession.’ He referred to . predictions by the Swiss bank UBS of a 20-25 per cent contraction in . gross domestic product for strong countries and 50 per cent for weak . countries. ‘I happen to think that the UBS figures are somewhat emotional,’ he said. ‘But it would certainly involve a recession on a scale beyond modern experience or comprehension in a Western democracy.’ In an extraordinary sign of alarm across the globe, five big developing countries said they were ready to discuss bailing out Europe. The leaders of Brazil, Russia, India, China and South Africa – the ‘BRICS’ countries – are to meet at the annual World Bank and International Monetary Fund summit next week to talk about providing emergency assistance. The head of the World Bank said the global economy had entered a new ‘danger zone’ and that the ‘time for muddling through’ was over. Robert Zoellick said: ‘Unless Europe, Japan, and the United States can face up to responsibilities they will drag down not only themselves but the global economy. They have procrastinated for too long on taking the difficult decisions, narrowing what choices are now left to a painful few.’ Treasury sources believe that Germany is now resigned to the eurozone breaking down in its current form and a new European ‘inner core’ being created. There is an increasing expectation that this will mean a new EU treaty. Downing Street confirmed that officials were working on ‘contingency plans’ aimed at trying to insulate Britain from a full-blown crisis in the eurozone, but refused to speculate about what form they would take. Deputy Prime Minister Nick Clegg, in a speech on the economy, warned: ‘The economic context is much worse than before. Yes, facts have changed.’ Shadow Chancellor Ed Balls warned of the danger of a ‘massive economic catastrophe’ on a larger scale than the banking crash in 2008. ‘The issue now isn’t really Greece, it is what is happening in Spain and in particular Italy,’ he said. Polish finance minister Jacek Rostowski, who will chair a meeting of EU finance bosses tomorrow, said the EU could be destroyed by the debt crisis. But the president of the European Commission, Jose Manuel Barroso, insisted that the answer to the growing threat to the euro was a more, and not less, integrated EU.
could contract by as much as 25 per cent in the that Greece will default on its massive debts and ratings of two of France’s . largest banks, Portuguese and Irish exposure. World markets rose Merkel have insisted Greece is in 'integral part' of the euro . Moody's has downgraded Societe countries in it – you’d have to have . France in