Euro Break-Up: Getting Closer to D-Day!
August 29, 2012 • 10:11AM

"The Secret Plans for the Euro-Crash" is the title of a detailed article in the Aug. 25 Frankfurter Allgemeine Zeitung on an exit scenario for life after the euro. Advisors from the business consultancy Capco have already written a 300-page study detailing every step of a euro exit, and lawyers are going from door to door of companies, to explain how subsidiary companies could go bankrupt without affecting the proprietary company, should Greece, for example, leave the euro. But since Spain is in need of the bailout fund, the teams are preparing for a complete breakup of the euro.

Under the subhead "All Plans Are Already in the Drawer," Alexander Roos from Boston Consulting Group claims that a third of all German corporate executives think that a breakup of the euro into north and south is probable. Although the so-called crisis teams in the various companies have been working out these scenarios for a long time, they still see the breakup from the standpoint of a statistical probability and not from a principled basis.

Apparently, no one is willing to admit that these plans exist, but they are already acting accordingly. Michael Diekmann of Allianz states, "Developments of the last months have increased the risks of a different scenario." Commerzbank also admits that it is going through different scenarios, and Deutsche Bank simply states "no comment."

But Deutsche Bank is one of those cutting off their foreign subsidiaries by refinancing them through the national central banks and no longer through the parent company, so that in a breakup both their liabilities on a national level and also their allowances to the central bank would go through the same devaluation. Furthermore, the big players are taking their liquidity out of Europe and renegotiating their derivatives contracts, so that their securities no longer are in Greece, Italy, or Spain (which would obviously default on the contacts), but in places like the City of London, which themselves want to include transferring the Greeks' sovereign debt to the U.K.

Even though the line of all the big DAX [German stock exchange] firms is still that they are "not participating in doom-mongering," Bodo Uebber of Daimler told FAZ, they are acting fully opposite by withdrawing all their liquidity from foreign banks every evening, so that if any Southern nation should leave the euro overnight, they would not face devaluation.

It is high time to stop these mad flows of money, and use them sanely for a new economic miracle.