More Eurozone Governments Gird for Greek Exit

Thursday, 24 May 2012 11:55 AM

 

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At least half of eurozone governments as well as banks and large companies are making contingency plans in case Greece decides to leave the single currency area, even though the preferred option is still for Athens to keep the euro.

Italy's Deputy Economy Minister Vittorio Grilli said his country was ready for such a possibility, if Greek voters on June 17 give power to parties that reject reforms agreed with the EU and IMF in exchange for emergency loans.

Greece's deficit means that without the EU/IMF money, which would stop flowing if Athens were to tear up the agreement on reforms, it would not be able to pay salaries and would have to leave the euro zone and start printing its own currency.

"We always have to be ready in any case," Grilli said, when asked by reporters if Italy was preparing for a Greek exit. "All options are possible, though our objective is to avoid that happening."

Senior European Union officials have told member states to prepare contingency plans in case Greece quits the euro zone, sources told Reuters on Thursday.

European Union leaders have urged Greece to stay the course on austerity and complete the reforms demanded under its bailout programme.

But there was no contingency planning at a European Union or political level yet, a senior official said, even though it was natural for individual governments to prepare for scenarios.

"Given the present situation and even before this, you can't imagine that nobody was thinking of all kinds of scenarios. That would not be responsible behavior," the official said.

Finland, too, was considering the implications of such an unwelcome possibility, which European Central Bank policymaker Ewald Nowotny said would create a huge disruption, with unforeseeable consequences.

"Throughout different turns in the crisis, Finland has been evaluating different paths and plans," Finance Minister Jutta Urpilainen told reporters, adding that the Helsinki government wants Greece to stay in the currency bloc.

Officials said that in addition to Italy and Finland, Germany, the Netherlands, Luxembourg, Belgium, Austria and Slovakia have also either already started, or would soon start, drawing up contingency plans.

Outside the eurozone, Sweden said it was ready.

"The fortresses are manned and we are meeting frequently with the Riksbank and the FSA (the Financial Supervisory Authority). We are well prepared," Swedish Financial Markets Minister Peter Norman told Reuters.

Among the corporations to be alert to the implications of any Greek euro exit are International Airlines Group, which is the parent company of British Airways, and German carmaker BMW.

"We're absolutely sure that the euro has a long future ahead of it," BMW global sales chief Ian Robertson said at a showroom opening in Paris. "That doesn't necessarily mean that it remains in its current structure."

European financial institutions have also been making their own plans for any such eventuality, though they might not have been shouting this out.

"Every bank has a task force right now looking at the potential consequences of a return to the drachma," one Paris-based banker said.

A consultant to French financial institutions added: "The banks are doing contingency planning concerning a Greek exit, but you can understand why they wouldn't say so publicly."

© 2014 Thomson/Reuters. All rights reserved.

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