by Stephen McPhie, CA
Partner, RSD Solutions Inc.
Perhaps “in its current form” should be added to that. For any corporate treasurer, this is an important question and should encourage them to re-examine their currency exposures and hedging practices. (Exposures may include hidden exposures like imported components in goods bought from domestic suppliers for example.) The effects of a Euro break up, or of a change in its form may well be felt much more and further afield than most people might realize. An independent analysis and view might be appropriate for many businesses. Whatever your view, this should be on the radar as high risk.
Too little too late has characterized all or most actions during the current crisis. Denial, prevarication and changing positions have also been in plentiful evidence. Of course, it is politicians of various different stripes and different nationalities and cultures that are trying to find a common solution to the problem. Not necessarily the recipe for a timely, practical and effective solution. The main player, Angela Merkel, has been trying to keep domestic political balls in the air during all this and that appears to have precluded swift and decisive action.
Of course it could be argued that without going to the brink, countries like Italy will not institute any truly effective reforms. On the other hand, the longer it takes to come to a satisfactory solution, the higher the cost is likely to be and the higher the risk that the house of cards will come crashing down.
There seems to be an intent to maintain the Eurozone in its current form. However, when going close to the brink, events can get out of control and unintended consequences come about. (Look back in history to how the First World War started.)
Next: Do I think the Euro will still be around in 5 years?
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