LONDON, England - December 26, 2011 - The government is considering plans to restrict the flow of money in and out of Britain to protect the economy in the event of a full-blown euro collapse.

The Treasury is working on contingency plans for the disintegration of the single currency, which include capital controls.

Preparations are being made only for a worst-case scenario and would run alongside similar limited capital controls across Europe, imposed to reduce the economic fallout of a break-up and to ease the transition to new currencies.

Officials fear that if one member state left the euro, investors in both that country and other vulnerable eurozone nations would transfer their funds to safe havens abroad. Capital flight from weak euro nations to the UK would drive up the sterling, dealing a devastating blow to the government’s plans to rebalance the economy towards exports.

Earlier this year, Switzerland was forced to peg its currency to the euro to protect the economy after a massive appreciation in the Swiss franc due to spiralling fears over Europe.

The plans emerged as Spain’s new finance minister, Luis de Guindos, warned that the country’s economy was set for negative growth in the last quarter.