Eurozone crisis: Business jitters spark EU cash flight
7 August 2012
Financial Times, Kurier
"Companies withdraw money from Europe", headlines Kurier. As the trust in the euro is fading, big groups fear a break-up of the eurozone and are moving billions of euros to the US. On Monday, the Dutch-British oil company Shell announced it is to transfer 15 billion euros, the majority of its cash reserves, and others will follow, the Austrian daily notes –
US funds redeploy their billions of dollars in the same way as do rich clients of American banks. Between December 2011 and May 2012, US investors brought back home from Europe nearly 50 billion dollars. This is the biggest cash flow in the USA since 1999.
In London, the Financial Times reports that Wall Street banks are increasingly advising firms to prepare for a eurozone break-up, and that the situation is more of a concern than the faltering US recovery. The newspaper adds –
Using hedges, such as credit default swaps, US banks have reduced their net exposure to troubled eurozone countries. But they are also engaged in more work behind the scenes to ensure that if a country leaves the eurozone they will not have to receive payments in a devalued drachma or peseta. A trader heading a eurozone crisis unit at another US bank said counterparties were being told to use collateral that could not suddenly switch from the euro to a new currency. Investors are not only having to deal with banks’ preparations for a eurozone break-up but make their own. Some hedge funds have stopped trading with Greek counterparties.