Defence chiefs are drawing up plans to cope with the potential military fallout from the eurozone crisis, according to General Sir David Richards.
It is understood that Armed Forces planners are looking at the possibility that a new global financial crash could undermine the defence forces of key British allies.
The head of the Armed Forces warned that economic issues pose a “strategic risk” to Britain.
Senior British commanders and officials are concerned that US plans to cut defence spending will be followed by other allies in Europe and elsewhere.
Reductions in allied military capabilities could put a greater burden on Britain’s stretched forces in Afghanistan and elsewhere, it is feared.
The military planning work has come to light after The Daily Telegraph disclosed last month that British embassies in the eurozone have been told to prepare emergency plans for the demise of the euro and the possible civil disorder that could follow.
Senior ministers are increasingly convinced that the break-up of the single currency is a real possibility. Economists suggest that the failure of the euro could cause EU economies, including Britain’s, to shrink by up to eight per cent.
Gen Richards, the Chief of the Defence Staff, said economic issues present the biggest threat to Britain and its interests in the world.
“I am clear that the single biggest strategic risk facing the UK today is economic rather than military,” he told the Royal United Services Institute
“Over time, a thriving economy must be the central ingredient in any UK Grand Strategy. This is why the eurozone crisis is of such huge importance not just to the City of London but rightly to the whole country and to military planners like me.”
The Armed Forces are facing painful cuts and the loss of tens of thousands of personnel, but Gen Richards said that such austerity was necessary.
“The country’s main effort must be the economy. No country can defend itself if bankrupt,” he said.
He used his speech to raise questions about the ability of European economies to sustain their armed forces. He asked: “What impact will fiscal restraint and slow recovery have on European defence capabilities?’’
Gen Richards also noted that America, which is facing deep defence cuts, has said it will switch the focus of its main military effort from the Atlantic to the Pacific and south-east Asia.
That means “less emphasis on Europe and her problems,” he said. Gen Richards also accepted that Britain’s defence cuts carry risks, but insisted those risks were acceptable.
“It will mean taking risk. But managing risk is ultimately what we do and none of us in the Armed Forces are discomforted by the challenge,” he said.
The Armed Forces will need to “combine realism with imagination”, he said.