Wednesday 13 December 2017

Big companies prepare euro break-up plans

Eurocrats force business to think the unthinkable

Nick Webb, John Reynolds and Roisin Burke

SOME of Ireland's biggest companies are making survival plans in the event that the eurozone collapses.

Multinational firms such as CRH and Diageo, food giant Greencore and major banks like National Irish Bank are all considering options in case plans by Europe's leaders to solve the two-year-long sovereign debt crisis fail.

Ireland's biggest company CRH has operations across the eurozone as part of its global footprint. The company's treasury team is understood to be working on a variety of strategies that are constantly under review.

"They do have a plan and have looked at the contingencies. They are looking at the situation very closely," according to a spokesman.

"We anticipate there would be costs for us as an Irish-listed company, with the level of measures needed for a currency changeover -- and the costs of that are difficult to calculate," according to Greencore boss Patrick Coveney.

"Since the 2008 banking crisis, our treasury function has ensured that all our corporate deposits are spread across a range of banks so we're not exposed to any one institution and have plenty of liquidity, in case of any similar sudden events," he said.

The banking sector is also bolstering defences. "Within our group we are following the development in Europe very closely and, of course, considering various scenarios," said National Irish Bank boss Andrew Healy.

Last week the European head of Guinness owner Diageo was the first to break cover and reveal the company was preparing for the possibility of a euro meltdown. "We've started thinking what a break-up might look like," Andrew Morgan, president of Diageo Europe, said on Tuesday. "If you get some much bigger kind of change around the euro, then we are into a different situation altogether. With countries coming out of the euro, you've got massive devaluation that makes imported brands very, very expensive."

"People are looking at it in detail in case there is a break-up of the currency. They are looking at things like interest rates and how to protect themselves against rising input costs if they source materials abroad. Some are in better shape than others," according to one top corporate advisor.

It is thought that major firms are examining options such as placing cash reserves in safer havens and keeping non-essential expenditure extra tight. Other companies are said to be looking at the legal consequences of a eurozone meltdown for cross-border commercial contracts and loan agreements.

"A good number of our members who do business with companies in Britain or the US have switched to getting paid in either sterling or dollars accordingly," according to Isme's Mark Fielding. "Many of our members moved money into Swiss francs earlier in the year and have lost up to 27 per cent as a result," he added.

However, other major Irish players are far more confident about the future survival of the eurozone.

"We have no contingency plan for the break-up of the eurozone because consequences for the Irish economy, the eurozone economy and the world economy are unimaginable," Glen Dimplex boss Sean O'Driscoll said.

"A break-up of the eurozone would be the economic and financial equivalent of a satellite breaking up in space with unimaginable consequences, with no one knowing where to pick up the pieces," he added.

Sunday Indo Business

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