Eurozone Crisis: RBS Chairman Says 'Small Country' May Leave The Euro

RBS Chairman Says Small Country May Leave The Euro

The chairman of the Royal Bank of Scotland, Philip Hampton, has said in a Sky News interview that he expects "a small country" to leave the eurozone.

As the political solution to the crisis begins to take shape, and markets have been encouraged by short term financial solutions, including a programme of cheap three-year loans being offered to banks by the European Central Bank (ECB), Hampton's comments are a reminder that there remains a real possibility of Greece, in particular, choosing to leave the single currency.

"It could be any of [the smaller countries] because I think that some of these things will be driven by political events as much as by economic circumstances and social unrest, and all of those sorts of things. But I think there is a very good chance that one country will fall out," Hampton said.

The conditions attached to the bailouts handed out to Greece, Ireland and Portugal include strict austerity measures, which could lead to a real fall in people's incomes and living standards, as well as social tensions.

While leaving the euro would be likely to cause even greater pain in the long term, the appearance of short term gain through competitive currency devaluation could seem attractive.

The "Troika" of the ECB, European Union and International Monetary Fund (IMF) is scheduled to meet with Greek leaders in mid-January, and the country has three weeks to demonstrate that its austerity measures are being implemented.

On Wednesday, the ECB revealed that more than 500 banks had taken advantage of a new programme of cheap three-year loans, which some saw as a possible way for the central bank to support weaker sovereign governments "through the back door".

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