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ECB plan may increase risk of Greek eurozone exit

A woman walks past a '1 Euro' shop in Athens.

Sarah Gardner: So, the euro today hit a two-month high against the dollar and European stock markets kept on rallying. Investors there are still basking in yesterday's news of a plan to sort out the eurozone debt crisis. But ironically, the plan has raised fresh doubts about Greece. And companies here and in Europe are hedging their bets preparing for Greece to leave the eurozone -- even though it might not happen.

We begin in London, with Marketplace's Stephen Beard.


Stephen Beard: Greece has tried the patience of its eurozone partners. It’s regularly failed to deliver all the agreed budget cuts and economic reforms. But Greece had one powerful factor on its side. Its partners were terrified that a Greek exit -- commonly called “Grexit” -- would unravel the euro. That fear may now recede because yesterday’s plan effectively put a firewall around other vulnerable eurozone countries like Spain and Italy.

Jan Randolph of IHS Global Insight says letting Greece go is not so risky now.

Jan Randolph: Greece has a lot less leverage because the firewalls are up now. The contagion impact is far less.

And that seems likely to accelerate a trend that has gathered speed this year. Foreign companies have been winding down their business with Greece -- for obvious reasons. Corporate lawyer Chris Robinson asks: Who wants be trading with the Greeks just as they might have to quit the eurozone and adopt a new currency?

Chris Robinson: The new drachma would be worth a great deal less than the existing euro. And anybody who’d sold goods to Greece on credit who was then paid in the new drachma would be very seriously disadvantaged.

Several big British corporations have admitted they’re taking no chances -- Vodafone, the cellphone giant, and Glaxo, the pharmaceutical firm. Both sweep money out of Greece and back into the U.K. every evening. Bank analyst Ralph Silva says the big British banks have also been bracing for Grexit.

Ralph Silva: I think the large banks are pretty well there. I would say that out of a 100 percent preparedness they’d be about 75-80 percent prepared.

Greek assets have been sold and credit lines terminated. And the banks may be anticipating Grexit in another way. No one will confirm this, but there have been persistent reports that the trading floors of London will be ready -- at the flick of a switch -- to deal in the new Greek currency.

In London, I’m Stephen Beard for Marketplace.

Listen to part two of this series.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.
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