While Greek Prime Minister Antonis Samaras’ uneasy coalition government is proceeding to make $14.16 in more cuts demanded by austerity measures to help keep the country from defaulting, American companies are reportedly already preparing for Greece’s exit from the Eurozone, including reconfiguring computers to handle a return to the drachma.
The New York Times reported that while Samaras and European Union (EU) leaders are glossing over Greece’s problems, that American businesses believe the country will fail because of unsustainable debt and no way to recover. More than 2 ½- years of austerity measures have only worsened Greece’s five-year recession, with nearly two million people out of work and the economy shrinking by 7 percent because Greeks – buried under pay cuts, tax hikes and slashed pensions – have cut spending to the bone.
The Times reported that behind the scenes, there are scary economic scenarios already in the works, including Bank of America Merrill Lynch considering filling trucks with cash and sending them over the Greek border so clients can continue to pay local employees and suppliers in the event money is unavailable. Ford has configured its computer systems so they will be able to immediately handle a new Greek currency, the paper said.
A Greek collapse would be the first for a Western democracy and no one knows how big the impact would be but big American banks and consulting firms have been doing a brisk business advising their corporate clients on how to prepare for a splintering of the Eurozone.
JPMorgan Chase has already created new accounts for a handful of American giants that are reserved for a new drachma in Greece or whatever currency might succeed the euro in other countries in case a Greek failure brings down the whole financial bloc including 16 other countries.
Many investors doubt whether Samaras can succeed in saving Greece as former prime minister George Papandreou, whose government was brought down last year by two years of protests, strikes and riots against the austerity ordered by the Troika of the EU-International Monetary Fund-European Central Bank, said Greece could have avoided the need for two bailouts totaling $325 billion if it had gone after tax evaders. He failed to do so and blamed the EU.
The Times said that Greece’s abandonment of the euro would most likely create turmoil in global markets, which have experienced periodic sell-offs whenever Europe’s debt problems have flared up, and put more pressure on also-troubled Spain and Italy. “It’s safe to say most companies are preparing,” said Paul Dennis, a program manager with Corporate Executive Board, a private advisory firm.
In a survey this summer, the firm found that 80 percent of clients polled expected Greece to leave the Eurozone, and 20 percent of those expected more countries to follow. “Fifteen months ago when we started looking at this, we said it was unthinkable,” Heiner Leisten, a partner with the Boston Consulting Group in Cologne, Germany, who heads up its global insurance practice told the paper. “It’s not impossible or unthinkable now.”
If Greece withdraws from the Eurozone, many analysts expect it would be announced on a Friday night when the banks are closed to prevent a run on the banks, and that the government would force banks to stay closed until it could reorganize. American companies who do business in Greece are said to be discussing ways to get cash into the country to pay workers, but those with accounts in Greek banks would not be able to access money.
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