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Banks Build Contingency for Breakup of the Euro January 18, 2012

Posted by proeconomia in Main, News on Greece, On the crisis, Opinion.

They won’t let us be, won’t they?! Here is an article from the NYT. Here are some excerpts. First, the Brits(!): ” “We cannot be, and are not, complacent on this front,” Andrew Bailey, a regulator at Britain’s Financial Services Authority, said this week. “We must not ignore the prospect of a disorderly departure of some countries from the euro zone,” he said.” Please!!! Sunday Times published this article about having Greece out of the eurozone in 10 weeks, did you provide them the info?!  OK, next the French and Italians: ” Banks in France and Italy in particular are not creating backup plans, bankers say, for the simple reason that they have concluded it is impossible for the euro to break up. Although banks like BNP Paribas, Société Générale, UniCredit and others recently dumped tens of billions of euros worth of European sovereign debt, the thinking is that there is little reason to do more. ”


It gets better, so here are some more excerpts:


Again the Brits: “The Royal Bank of Scotland is one of many banks testing its capacity to deal with a euro breakup. “We do lots of stress-test analyses of what happens if the euro breaks apart or if certain things happen, countries expelled from the euro,” said Bruce van Saun, RBS’s group finance director. But, he added: “I don’t want to make it more dramatic than it is.””, And again, “In a survey published Wednesday of nearly 1,000 of its clients, Barclays Capital said nearly half expected at least one country to leave the eurozone; 35 percent expect the breakup to be limited to Greece, and one in 20 expect all countries on Europe’s periphery to exit next year.”

OK, next: sort Spain, Italy, Portugal and France (apparently Greece would be a barter economy so there would be no reason to have a currency to sort!!!) and long on Germany, Netherlands and Ireland (yes, Ireland is to appreciate against the dollar…). Here you go:  “Some banks are now looking well beyond just one country. On Friday, Merrill Lynch became the latest to issue a report exploring what would happen if countries were to exit the euro and revert to their old currencies. If Spain, Italy, Portugal and France were to start printing their old money again today, their currencies would most likely weaken against the dollar, reflecting the relative weakness of their economies, Merrill Lynch calculated. Currencies in the stronger economies of Germany, the Netherlands and Ireland would probably rise against the dollar, according to the analysis.”




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