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Europeans Developing Contingency Plans for Euro Crash
28 May 2012
European governments and financial institutions are now openly acknowledging that they are, indeed, putting in place Plan B options for the disintegration of the euro system. In an interview with the Sunday Telegraph , Lloyds of London’s CEO, Richard Ward, said bluntly, "I’m quite worried about Europe. With all the concerns around the eurozone at the moment, we’ve got to be careful doing business in Europe and there are a lot of question marks over writing business in the future in euros. I don’t think that if Greece exited the euro it would lead to the collapse of the eurozone, but what we need to do is prepare for that eventuality." Ward acknowledged that Lloyds was working, along with others in the City, on contingency plans. "We’ve got multi-currency functionality and we would switch to multi-currency settlement if the Greeks abandoned the euro and started using the drachma again." Another large underwriter of European euro-denominated debt, the Franco-German firm Euler Hermes, has indicated that it may abandon writing credit default swap insurance on Greek debt denominated in euros. A spokesman for the company told the Sunday Telegraph, "The outcome of the new elections in June remains highly uncertain. Consequently, the situation is further deteriorating. The risk of Greece exiting the eurozone has been revived." Swiss Central Bank chief Thomas Jordan also admitted on Sunday that his government is drawing up an action plan in the event of a collapse of the euro. The pileup of crises continued unabated into the weekend. The Sunday Telegraph also reported that former Greek Prime Minister Lucas Papademos wrote a confidential memorandum to Greek President Carolos Papoulias on May 11, confirming that Greece will run out of cash by the end of June, unless the EFSF and IMF loans are delivered on time. The availability of funds in the Greek government will be reduced gradually from around 3.8 billion euro on May 11 to about 700 million euro on June 18, and from June 20 will enter negative territory at the level of around 1 billion euro. Without the bailout funds, Greece will default and leave the euro. The crisis will peak as Greek voters go to the polls and another effort is launched to create a new government. |