In recent weeks there have been several reports of firms and nations getting ready for an exit of Greece from Europe’s single currency. Many are expecting that to happen some time in the next few weeks as the country ramps up for another round of elections. If that comes to pass as least the following will be ready.
Euro Zone Countries: Back in May Reuters reported that Eurozone officials had agreed that each Eurozone member state should draw up its own plan to deal with the exit of Greece from the single currency. Apparently the officials involved left it until May to begin work on the contingency plans in case there were leaks that might have sparked fears of an exit. The move seems so likely at this stage that leaks are no longer shaking the market to any degree.It appears those plans are so secret that many of them are not in fact being committed to paper. Despite the occult trappings of the European Bureaucracy, they will be ready if Greece has to be removed from the Union.
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Investors: Money has been flowing into US treasuries for some weeks, even as the yields on those assets are incredibly low. Investors are looking for a safe place to stash their money to weather out the huge problems and volatility that will surely be a characteristic of a Greek exit. The possibility of this exit has not been kept a secret and many expected it even sooner than now, Investor are flocking to dollar assets and others deemed low risk in order to shelter from the storm.
China: According to the Chinese government, plans are being drawn up to deal with a Greek exit and the implications it might have on the country’s economy. China will be one of the hardest hit if Europe becomes even more unstable. The country is already on the verge of a large economic readjustment. European failure could precipitate that much more quickly. China is apparently looking at the effects of a Greek exit on capital flows, currency rates and trade. The last of those is of the most concern to the world’s second biggest economy.
Banks: As we previously reported, banks in the United Kingdom are preparing themselves to deal with a new “Drachma”, or whatever the new Greek currency will be titled. The banks, including the like of Goldman Sachs Group Inc., (NYSE:GS) and HSBC Holdings plc (LON:HSBA), are reducing their vulnerability to peripheral nations in anticipation of the exit. Credit Agricole SA (EFA:ACA) is setting up contingency plans to either abandon its Greek branch or merge it with a Greek conglomerate. Lloyds Banking Group PLC (LON:LLOY) (NYSE:LYG) has organized a “Euro Instability Committee” in charge of preparing for a Euro-Zone meltdown. Royal Bank of Scotland Group plc (NYSE:RBS) is trying to sell Greek bonds, before the debt is marked down to zero.
Currency Traders: Apparently currency traders are getting ready to officially trade a new Greek currency. Icap, the world’s largest foreign currency dealer, is readying its systems to deal with a new Greek currency, at the beginning of June Bloomberg’s systems began showing a Greek Drachma trading on their system which was apparently due to some kind of glitch. Those in charge of listing and following currency movements are clearly ready to accept the Drachma into the fold without too much hassle.
Businesses in Greece: Of course those hardest hit by an exit of Greece from the Eurozone will be firms inside the country. Dixons Retail plc (LON:DXNS) operates over a hundred store in Greece. That firm is adding security shutters to all of its stores in order to protect them in the case of rioting and looting. A major Greek travel agent is making its accommodation providers sign contracts that would force them to accept Drachmas as a form of payment in the case of a Euro exit. No matter what happens in China, or Germany or on Wall Street, nobody will suffer from this quite as terribly as Greece’s businesses and its people.
Currency Printers: Rumours circulating around the currency printing world point to De La Rue plc (LON:DLAR) as the company most likely to benefit directly from a Greek exit. The speed of printing necessary to allow a quick Greece switch over means that Greece will be paying a premium for the services of the document design and manufacturing company. Even if De La Rue don’t get the contract somebody will and the necessary speed means possible subcontracting. If you’re looking for any single company that can be said to directly benefit from the exit of Greece from the Euro look no farther than the world’s currency printers. They haven’t been this excited since the introduction of the Euro.
Greece’s exit looks likely but it is not inevitable. Tense discussions are undoubtedly being held at this very moment at Europe’s highest level. Greece has not yet even had its elections. There is no necessity that the country exit the Euro next week but that eventuality is looking the most likely today. At least we can be sure that the world is somewhat prepared for the unprecedented event.