Politics: If Greece falls, Britain will suffer

When George Osborne delivered his first budget, Greece made the perfect backdrop. The television news channels had split screens: on the left side, the new Chancellor making the case for austerity. On the right side: riots in Athens as a government confronted the consequences of its profligacy. Now, as then, British eyes are on Greece — but for different reasons. The prospect of a Eurozone banking crisis has now overtaken rampant inflation as the greatest single threat to the British economy.

The risk is not Greece itself, which, for all its great difficulties, remains a small and marginal economy. British holidaymakers may quietly pray for the return of the drachma and, with it, the cheap European holiday. But this is where the opportunity ends. If Greece’s collapse spreads to other countries on the Eurozone’s periphery then Portugal will be next: another profligate, corporatist economy in desperate need of radical reform. It remains to be seen whether Spain and Italy, the next two dominoes in line, will also tumble over.