Reuters and the FT report that large corporations and banks have started preparations for the eventual break-up of the eurozone. Reuters reports that
Drawing on interviews with company officials, bankers and lawyers in Europe, the United States and Asia and companies’ regulatory filings, Reuters has pieced together a picture of patchy preparedness for the possible demise of the 12-year-old euro currency, an event that would be unparalleled in recent history.
Apparently, companies outside the regions all also making preparations.
It is hard to know what to plan for. Some analysts believe that if Greece defaults and leaves the alliance, the effects may be minor because of its modest GDP. The fund established by eurozone nations to provide bailouts is also large enough to cover Greece’s debt if necessary.
A full break-up of the eurozone is another matter entirely. The process might begin with default of Spain and Italy. The effects on their economies would be devastating and each would probably be driven into a depression. These nations are large enough in GDP that countries that export to them could be badly hurt.
In terms of banks, many of the largest financial firms in Europe have have sovereign exposure. These firms may have to be bailed out by their own governments.
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