Eurozone crisis: How business is preparing for Eurogeddon
1 December 2011
Eurozone leaders may insist that a euro break-up is “never going to happen” but “some banks are no longer so sure”, points out the New York Times.
Banks including Merrill Lynch, Barclays Capital and Nomura issued a cascade of reports examining the likelihood of a breakup of the euro zone. “The euro zone financial crisis has entered a far more dangerous phase,” analysts at Nomura wrote on Friday. Unless the European Central Bank steps in to help where politicians have failed, “a euro breakup now appears probable rather than possible,” the bank said.
The New York daily of report expresses surprise that “banks in big euro zone countries that have only recently been infected by the crisis do not seem to be nearly as flustered.”
"While in the United States there is clearly a view that Europe can break up, here, we believe Europe must remain as it is,” said one French banker, summing up the thinking at French banks. “So no one is saying, ‘We need a fallback.’”
The Financial Times has followed up on this story with a report that international companies are preparing contingency plans.
Car manufacturers, energy groups, consumer goods firms and other multinationals are taking care to minimise risks by placing cash reserves in safe investments and controlling non-essential expenditure. Siemens, the engineering group, has even established its own bank in order to deposit funds with the European Central Bank.
The London business daily points out that “Some businesses with global reach say a euro break-up would be grim but manageable.” It also notes that:
Some French, Italian and Spanish executives say they have plans in place for severe financial and economic turbulence, but not specifically for a euro break-up. The risk, in their eyes, is that the region’s stability might come under even greater threat if it became known that companies were contemplating the worst.
French financial daily Les Echos focuses on the return to national currency that such a euro break-up would entail. It reports that:
For months [British brokerage firm] Icap has been discreetly testing a return to the Greek drachma on its EBS electronic platform, the largest interbank exchange for currencies.
In Warsaw, Dziennik Gazeta Prawna reports that businesses around the world might be preparing contingency plans, but that “Polish companies keep their cool.” According to one spokesperson from Solaris Bus & Coach:
... should the euro zone collapse, it would not be a blow to us. We already take payments not only in euro, but also in in Czech crowns or Swedish krona.
Meanwhile the vice-president of an aluminum can manufacture, says that “nobody knows what the euro zone collapse would look like in practice. The only thing we can safeguard against is currency fluctuations.”