Thursday, September 27 14:34:08
Every 15 days, top executives at Greek food company Vivartia gather to gauge how well-prepared they are in the event that Greece succumbs to its debts and crashes out of the euro zone.
The executive team, conceived around a year ago at a time of mounting public anger over painful austerity measures enforced by Greece's international lenders, examines doomsday scenarios such as a return to a nationwide barter economy, an Internet blackout, a bank run and a freeze on supplies.
They are the kind of events that would send shockwaves throughout the world and Vivartia's executives are not alone in trying to prepare for the worst.
Such contingency planning may sound extreme in the light of recent European Central Bank pledges to roll out extra monetary firepower to help keep the euro intact, but company treasurers and cash managers are showing little sign of relaxing when it comes to the euro's future.
"There is always more you can do," said Vivartia Treasurer Marianna Polykrati, on the sidelines of a conference in Monaco.
Her company, a unit of dairy to telecoms conglomerate Marfin Investment, has thought of everything from fire-proof vaults for company documents to stocking fresh oranges in case supplies of frozen orange juice dry up.
Polykrati said it was still far from certain that Greece would manage to stay in the euro zone. Asked about the probability of a "Grexit", Polykrati said: "Fifty-fifty."
Such nervousness appears to be widely shared in the corporate world. The past two days' protests in Spain and Greece have put the euro area's viability back on the agenda, some bankers say, after a relatively calm summer helped in part by ECB President Mario Draghi's promise to keep the currency bloc intact whatever the cost.
"In the last 48 hours, dialogue on contingency planning has been picking up again," said John Gibbons, JPMorgan Treasury Services' regional executive for EMEA, also speaking at the Eurofinance conference, for corporate treasurers. "It's highly susceptible to what's going on in the news."
Data today showed the outlook for Europe's economy darkening again, with euro zone business confidence falling to a three-year low and a range of economic indicators across the continent pointing towards recession.
Corporate treasurers, whose job is to keep company purses intact and at the same time flexible enough to fund operations, are by nature conservative and it is perhaps not surprising that they would hold back from the kind of optimism seen recently on the stock market.
The FTSE Eurofirst 300 index of blue chip stocks has lately risen to its highest in more than a year on the back of hopes for a euro zone fix.
But trends suggest broader fears about the macroeconomic outlook and the eurozone economy are pushing companies to do more than just plan for extreme scenarios. Firms are hoarding cash and putting off investment decisions, concerned more with protecting their balance sheets and the viability of their suppliers as the global economy slows. Hopes for a central bank-driven resurgence in corporate investment have yet to be realised.
"If you talk to most boards they are very nervous about macro (economic) growth perspectives," said Alison Rose, head of wholesale banking operations in Europe, Middle East & Africa at Royal Bank of Scotland. "There is a lot of nervousness about the euro."
Vivartia's worst fears may never become reality, but Polykrati says the company is already acting on them. It has sold assets to raise cash and is laying ground for new investments in non-euro economies like the United Arab Emirates and the United States.
"We are trying to keep the business here stable for two years," she said. "Greek banks ... have closed the tap right now." (C ) Reuters