Eurozone Crisis: A Treasurer’s Survival Guide

Published: Dec 2011

In 2008, the outlook was certainly bleak. In 2011, things seem to be going from bad to worse. Governments were at least able to step in and rescue their country’s banks in the wake of the Lehman collapse. Today, it is both Eurozone banks and governments that need support and there is a distinct lack of co-ordinated effort in doing so.

So where does this leave the treasurer? In this unsponsored special supplement, we tackle the core challenges that the Eurozone crisis presents: will Eurozone leaders make an unprecedented leap towards fiscal union or will the single currency begin to fragment? Moreover, what safety measures should treasurers pursue to avoid the brunt of any fallout?

This article was originally published on 1st Dec 2011

Crisis part II

In 2008, the outlook was certainly bleak. In 2011, things seem to be going from bad to worse. Governments were at least able to step in and rescue their country’s banks in the wake of the Lehman collapse. Today, it is both Eurozone banks and governments that need support and there is a distinct lack of co-ordinated effort in doing so.

So where does this leave the treasurer? In this unsponsored special supplement, we tackle the core challenges that the Eurozone crisis presents: will Eurozone leaders make an unprecedented leap towards fiscal union or will the single currency begin to fragment? Moreover, what safety measures should treasurers pursue to avoid the brunt of any fallout?

Governments were at least able to step in and rescue their country’s banks in the wake of the Lehman collapse. Today, it is both Eurozone banks and governments that need support and there is a distinct lack of co-ordinated effort in doing so.

This supplement is composed of two parts. The first offers an in-depth analysis of the problems driving the Eurozone crisis, outlining the possible paths Europe could take. This is followed by survival strategies for treasurers, including an overview of where your peers are putting their cash. We also get a candid perspective on the crisis from one treasurer operating in Greece.

Despite the doom and gloom, an element of optimism still exists among our interviewees. This ‘silver lining’ stems largely from the fact that treasurers have been forced to become increasingly switched on to doing more with less, eliminating wasteful practices that may have once been overlooked in the bygone ‘years of plenty’.

Despite the doom and gloom, an element of optimism still exists among our interviewees. This ‘silver lining’ stems largely from the fact that treasurers have been forced to become increasingly switched on to doing more with less…

A sharpened eye has now developed over company cash flow; counterparty relationships have strengthened as a result of more frequent contact; and forward-thinking treasuries are making full use of new technology in order to optimise their operations. When there is a crisis, there is also opportunity.


In creating this supplement, Treasury Today has conducted numerous interviews with high profile corporate treasurers and economists, whom we would like to thank for their openness and community-minded approach. We recognise that corporate communication policies are particularly strict at the moment, with many unable to address what has become the ‘elephant in the room’.

Our thanks to the following people:

Martin Daunton, Cambridge University; Paul De Grauwe, Louvain University; Joanna Hawkes, Misys; Peter Lay, The British Council; Marianna Polykrati, Vivartia; Mark Wyllie, CME; and all those who requested to remain anonymous.

What will the future hold for the Eurozone?

The Eurozone is facing a crisis of unprecedented proportions. Greece, Ireland and Portugal have succumbed to bailouts, and European leaders are still scrambling to limit the contagion. Only one thing is certain: the euro must change drastically if it is to survive. But which direction will it take?


The Eurozone crisis did not begin in May 2010 with the first bailout of Greece. Rather the problems troubling Europe’s single currency are structural in origin: they date back to the decisions taken, and provisions outlined, in the Maastricht Treaty of 1992, which set the roadmap for the creation of the euro.

Even then, the Eurozone did not constitute an ‘optimal currency area.’ A characteristic of such an area is that developments or shocks that occur outside the region in question cannot affect the participating economies in completely different ways. Take, for example, a global oil crisis or a global financial crisis: in an optimal currency zone, internal mechanisms – such as a high level of labour mobility, wage and price flexibility, and a common fiscal system – will work to compensate for differences that might arise when an external shock occurs. In other words, any genuine currency union requires ‘substitution mechanisms’ to compensate for the absence of flexible exchange rates and independent interest rate policy in member countries.

However, the euro area lacks these mechanisms. Bureaucracy, cultural barriers and linguistic differences mean that the Eurozone fails to meet the above criteria by a wide margin. Poor labour mobility is found across the single currency area; the widespread practice of collective bargaining agreements in Europe work against wage and price flexibility; and, in terms of fiscal policy compensation mechanisms, the Eurozone falls far below the standard set by the United States, another currency zone. It is for these reasons that Milton Friedman wrote in 1997: “Europe exemplifies a situation unfavourable to a common currency. It is composed of separate nations, speaking different languages, with different customs, and having citizens feeling far greater loyalty and attachment to their own country than to a common market or to the idea of Europe.”

The three challenges of the Eurozone crisis

Fast forward to the winter of 2011, and we have seen the bailouts of three Eurozone countries: Greece, Ireland and Portugal. Bond markets have now turned their sights to Italy and Spain as the next contenders, with ten-year bond yields for both countries tipping over the 7% level – a well-known bailout indicator – in mid-November. The crisis, as it currently stands, can be seen as three distinct problems. First, European politicians must act to put Greece, laden with a total debt burden of almost 170% GDP, back on a sustainable path of repayment and, eventually, economic growth. The second problem centres on the European banking system: simply put, investors seriously doubt that financial institutions remain solvent with the vast amounts of Greek and other periphery debt on their books. Eurozone leaders, then, must recapitalise the banking system to such a level that restores market confidence.

It is the third obstacle that remains most uncertain however: an economic ‘firewall’ must be built so as to protect larger Eurozone economies from contagion stemming from the periphery. The outcome of this challenge will depend on two key players: the European Financial Stability Facility (EFSF) – the bailout fund created by the EU – and Italy. As events unfold it has become clear that, if the Eurozone crisis spreads to continental Europe, it will do so by means of crossing the Italian Rubicon. With the resignation of Silvio Berlusconi throwing the Italian political landscape into further uncertainty, all eyes remain on Rome.

The market’s lack of faith

The driving force behind this crisis has been the market’s doubt surrounding the resolve and, indeed, the political capability of Eurozone leaders to contain the economic contagion. It is this dynamic that continues to drive the euro crisis into uncharted waters, for the markets are driven by political headlines.

The direction taken by the Eurozone will depend largely on the political will of European leaders – particularly Germany and France – to create lasting economic institutions that not only restore market confidence, but also give the Eurozone the ability to cope with future crises. “I think we are really at a point of dislocation now,” says Paul De Grauwe, Professor of International Economics at Louvain University in Belgium. “If we manage to save the system, then this will lead to further integration. If we fail, then we may very well end up in a process that leads to disintegration.”

With turmoil in European markets still in full swing, the only thing to be taken as certain is that the single currency will have to change substantially if it is to continue to survive. Here, we look at the possible paths, or rather the broad scenarios, facing the Eurozone.

1. Towards integration?

The EU chooses to move towards fiscal union in response to the crisis. There are several degrees and angles, however, by which Eurozone member states can approach fiscal union.

Fiscal federalism

Fully fledged fiscal federalism entails the creation of a supranational EU fiscal authority with the power to set its own spending programme for member states and issue Eurobonds, ie debt securities guaranteed by all 17 Eurozone economies. These Eurobonds would, in effect, allow countries in the euro area to pool their risk and avail of lower interest rates. Economists argue that fiscal federalism is a key step towards the formation of an authentic ‘optimal currency union’ akin to the United States, which would allow the Eurozone to respond effectively to a variety of crises by means of co-ordinated monetary and fiscal policy measures.

However, the chances of fiscal federalism in the short to medium term are rather slim. Two significant barriers remain. Firstly, there are the political obstacles: governments and electorates are likely to be unwilling to give up further sovereignty to a supranational authority deemed unaccountable to popular vote. For many member states, fiscal policy is the remaining cornerstone of national economic sovereignty.

Secondly, there are the legal hurdles to face. The implementation of fiscal federalism in the EU would require a substantial revision of existing treaties, requiring referenda in Ireland, the UK and possibly other countries as well – an unappealing prospect after the drama of passing the Lisbon Treaty. So, while the 1957 Treaty of Rome, a document famous for outlining the roadmap of future EU integration, states that EU member states “are determined to lay the foundations of an ever closer union among the peoples of Europe,” in 2011 the prospect of fiscal federalism is still a long way off.

The European Financial Stability Facility

The eventual outcome of the Eurozone crisis is likely to hinge on the European Financial Stability Facility (EFSF), the temporary bailout fund created by the EU as a response to the Greek bailout in May 2010. The EFSF, backed by Eurozone member guarantees of up to €440 billion, was initially created to financially assist smaller economies on the periphery, such as Greece and Ireland, until June 2013. However, what was originally designed to limit economic contagion to the outskirts of Europe has now evolved, by means of the emergency EU summit in July 2011, into a facility with extra firepower to deal with threats posed to larger Eurozone economies. The EFSF can now “act on the basis of a precautionary programme,” ie on the basis of its own initiative, to buy bonds on the primary and secondary market (bond markets, of course, determine what it costs for a government to borrow) as well as offering credit lines to Eurozone countries who are not at risk of immediate insolvency.

Following the bailouts of Greece, Ireland and Portugal, however, the rescue fund’s reserves have now diminished to roughly €250 billion. In response to market pressure, European leaders in late October agreed to two further changes to boost the EFSF’s capability (but without extending the guarantees underpinning the facility). First, the EFSF can now provide optional credit enhancements to new Eurozone debt on the primary market. This method in effect reduces the funding costs for member states by offering risk insurance to private investors should they wish to purchase it.

Secondly, and more importantly, however, is the use of Special Purpose Vehicles (SPVs) to boost the EFSF’s capacity. Private and public financial institutions, such as the IMF, can augment the amount of lending by providing resources through SPVs. In sum, these two additions could mean that the fund’s firepower is leveraged to cover €1 trillion. With a 50% cut in the face value of Greek bonds, in addition to a bank recapitalisation plan to the value of €106 billion, it is hoped that the Eurozone crisis will begin to stabilise.

The current EFSF strategy constitutes only a small step towards fiscal union. Tellingly, European leaders rejected calls to increase their EFSF guarantee commitments, suggesting little appetite for what are in effect fiscal transfers to troubled periphery economies. The financial press has united in criticising the new deal as a meagre response to the gravity of the crisis at hand; and markets, for their part, have not bought into the proposed cure. The EFSF bond auction in early November, for example, struggled to raise €3 billion required for Ireland’s bailout, paying investors close to 3.6% in yield – far higher than any previous EFSF auction. “Now we are really talking about the survival of the system,” says De Grauwe. “People will have to set aside their doormats and be willing to save the system by massive financial assistance. If they don’t want to do that, the whole system will collapse. It is an existential problem now.” A successful solution to the Eurozone crisis will have to involve some degree of fiscal integration. But it remains doubtful that the EFSF will make the mark.

The procedure for leaving the Eurozone is flaky at best. According to Article 50 of the Lisbon Treaty, the most recent document on European integration, “Any member state may decide to withdraw from the union [ie the EU] in accordance with its own constitutional requirements,” but there is no actual provision for a country to exit the Eurozone itself. “There was no exit strategy designed into the Eurozone like there was with the Gold Standard, nor the flexibility offered by the alteration of the exchange rate which the Bretton Woods regime had,” says Martin Daunton, an economic historian at Cambridge University. “This comes down to the political motivation [behind the project], rather than economic motivation.”

In other words, for a country to leave the Eurozone it must forsake membership of the EU as a whole. This is not a procedure that can be completed overnight. Any country who wishes to exit must first make a formal request, for under existing legislation there is no provision for expelling a member state from the Eurozone. What follows is a long, negotiated process. The exit procedure may only be completed once the European Council, comprising the 27 heads of state in the EU, agree to the country’s request with a qualified majority. If the country’s bid fails, however, there is a provision which states that exit can take effect two years after the initial application to withdraw from the EU was made, even though the bid was rejected.

2. Towards disintegration?

This scenario sees the EU unable to respond effectively to the crisis. Market pressure and structural inconsistencies mount to such a level that the Eurozone begins to fray. A fragmentation of Europe’s single currency, however, could take a variety of forms – from the exit of Greece and other periphery economies to the very break-up of the Eurozone itself. But it is important to note that such a fate is highly unlikely, if only for the fact that the costs associated with the collapse of the euro far outweigh the price of keeping it together.

Greece exits the Eurozone – with other periphery countries to follow?

Since the country’s first bailout in May 2010, there has been sustained speculation of Greece’s withdrawal from the Eurozone. By leaving the single currency, the argument goes, Greece can devalue the real burden of its debt – both public and private – by introducing a new, weaker currency, similar to the old drachma. The country could then set itself on a sustainable path towards paying down its debt and economic growth. But leaving aside the legal and institutional complications surrounding Greece’s exit of the Eurozone (see box Legal difficulties of exiting the euro), how is such a scenario likely to pan out?

Greek real GDP (annual % change)

Source: Thomson Reuters Datastream

In reality, Greece’s exit would be far more convoluted and painful than the argument outlined above. Furthermore, the country’s exit would likely precipitate the expulsion of other periphery economies, such as Ireland and Portugal; once Greece establishes the precedent, markets would certainly begin pricing in exits of other Eurozone members.

As soon as the markets take the prospect of Greece’s Eurozone exit as a given, there would be an immediate run on the nation’s banking system – both in terms of its domestic banks and the branches of non-Greek financial institutions located in the country. This would be due to the (realistic) expectation that Greece’s new currency would be devalued by as much as 50% – a move that would reduce substantially the real value of both Greek income and savings.

The rational strategy to avoid this would be to withdraw euros from the Greek banking system prior to the credit event (provided, of course, that emergency capital controls are not put in place by the Greek government). This could be achieved by two methods; transferring savings or investments to a foreign European account in a non-Greek banking institution; or simply withdrawing cash in euro and hiding it under a proverbial mattress. The effect is the same: wealth remains in euro and escapes devaluation.

The end result, however, would be a collapse of the Greek banking system long before the country actually exits the Eurozone – a long and protracted process in itself. Furthermore, Greece’s capital inflows would dry up as soon as the euro exit was announced. What would emerge from such an outcome? It is likely that a two-tiered European currency area would arise: an integrated cohort of strong economies remaining within the Eurozone, on the one hand, followed by several periphery economies returning to their legacy currencies – albeit pegged at an attractive rate to the euro – on the other. An outcome such as this, however, would have severe consequences for EU policy co-ordination, both on an economic and political level, dealing European solidarity a damaging blow.

A collapse of the single currency?

The complete disintegration of the euro would see member states reverting back to national currencies. However, given the amount of political capital and energy invested into Europe’s single currency, it is a highly improbable outcome. A collapse of the single currency would likely spell the end of further economic integration at a European level – at least in the short to medium term – for monetary union constitutes the cornerstone of the European project.

But were such a situation to arise, it would not result from Greece’s exit. Rather it would originate with the decision of Germany, or perhaps another economic heavyweight, such as France, to withdraw from the currency union, dealing what remains of the euro’s fiscal credibility a severe blow.

After the collapse of the Bretton Woods agreement in 1971, the German Bundesbank became the pillar of monetary rectitude and conservative orthodoxy in Europe. Other EU member states slowly gravitated towards pegging their currencies to the deutschmark, which in turn became a safe haven in troubled times. Were the single currency to collapse, it is arguable that such a development would occur again to form the basis of a post-euro economic order. Such a development, however, may prove unpalatable to the Germans. The disintegration of the euro would likely result in unprecedented inflows of capital into the country, pricing its exports – the country’s main source of growth – out of competition.

In the next part of this supplement, we look at how treasurers can prepare for the future of the Eurozone – whatever it may hold.

Don’t panic!

Credit rating downgrades, default scares, and political instability have come to constitute the ‘norm’ of daily business for many treasury functions. Nevertheless, the deepening of the Eurozone troubles has stoked further volatility in bond and foreign exchange markets, generated an even sharper focus on country and counterparty exposures and ultimately undermined what little confidence there was in the European banking system.

So what has this meant for corporate treasury departments and their priorities? More importantly, where should treasurers be looking for opportunities to improve their operations and turn a bad situation on its head? First of all, we look at what treasurers should do to plan for the worst case scenario.

How to prepare for Eurogeddon

Treasurers need to begin taking preventive measures now, if they haven’t already. This means undertaking contingency planning with both the treasury team and the C-suite. Given that the exit of a country from the Eurozone would mean another sustained period of economic turmoil, corporates would be well advised to conduct scenario planning at a macro level and at country-by-country level, looking at what happens if (or when) a particular country leaves the euro.

Naturally the depth and breadth of any contingency plans will depend on the company’s operations and exposure to the Eurozone, but some useful pointers and areas to consider include:

  • Move as much cash out of periphery banks as possible – including the branches of international financial institutions located in Greece and other ‘at risk’ nations. Also limit the time for which cash is held in ‘unsafe’ accounts where possible. In fact, a thorough assessment of the health of all banking counterparties would be advisable.
  • However, liabilities could be left or increased with these ‘at risk’ counterparties if credit lines are available, although the interest cost might be too high to make this a realistic possibility.
  • Revisit all aspects of risk, not least FX. How would the company be impacted by sudden changes in exchange rates? What hedges are currently in place and are all future non-euro exposures hedged?
  • FX counterparties will also need to be reassessed in terms of the risk they present to the company. What euro FX contracts are in place and with which banks? Can new contracts be taken out with non-Eurozone banks?
  • International trade contracts must be scrutinised for currency and counterparty concerns. Do you have outstanding deals with a company in one of the weaker member states? Are those contracts denominated in euro? In the event of a country exiting the Eurozone, contracts would have to be altered to take into account any new currencies or devaluations. Consider whether new sales and supplier contracts should contain currency clauses stipulating the obligations in the event of a country leaving the euro. Also, if the counterparty were unable to honour the contract, how severe would your losses be?
  • Identify the areas of the business where notes and coins are handled and consider the impact of a change in currency.
  • In addition, how will payments systems cope with currency changes? What about your TMS? Will other in-house systems and processes, such as invoicing, be affected? And payroll? How long will it take to get any necessary adjustments in place? Do not be afraid to ask banking partners and vendors about the ramifications of a country leaving the Eurozone.
  • Re-examine supply chains in tandem with the procurement team. Should inventories of certain critical parts be increased to minimise disruptions to the physical supply chain? Consider financial flows and identify suppliers that are most likely to experience problems – widespread insolvencies will no doubt follow if a country exits the Eurozone. Make sure alternative, reliable suppliers are available in another country.
  • Given that the Eurozone turmoil is likely to remain a concern for the foreseeable future, companies may want to reconsider the markets they export to as well. Is demand likely to drop off even further from Eurozone countries? Would it be better to find new countries to export to in the emerging markets?
  • Consider how local operations will be affected. What will happen if an entity suddenly loses its access to credit? Also, how would a euro break-up affect staff on the ground in peripheral nations? Political and social unrest may put company buildings, property and employees at risk – make sure the appropriate precautions are taken.

Elsewhere, a close eye should be kept on events in the Eurozone, but newspaper headlines are not enough. Treasurers should look towards the websites of the governing political parties.

There is a mine of useful information on existing and upcoming policy initiatives that can be found online. Furthermore, policy documents can often give clues to possible contingency initiatives down the line, should certain market events occur.

This is very much a case of planning for the worst, but it is always best to be prepared.

Making the most of a bad situation

Aside from contingency planning, treasurers must continue to improve their internal processes as the Eurozone crisis continues to erode profits, growth and yields. This means looking to minimise unnecessary capital expenditure and maximise operational efficiencies. Going back to 2008, if there was one lesson learned by treasury professionals in the wake of the Lehman collapse, it was to go ‘back to basics.’

Although many of the same tactics also apply this time around, there are some fundamental differences too. Typically, in times of economic turmoil, investors flock to safety; capital is usually shifted out of volatile equity markets into fixed income in order to take advantage of the traditional security offered by governments and money markets. Today, however, the usual safe havens, such as government bonds, constitute the epicentre of risk. The extensive holdings of Eurozone periphery debt in the European banking system are making risk decisions harder for corporates, not just at the investment level but also in terms of their cash management.

European financial institutions are not alone either. As of late September, the top six American banks held $50 billion in Eurozone periphery debt on their books. In mid-November it was reported that the four largest UK banks cut their lending exposure to the periphery by 25% in the past three months. Financial institutions are increasingly depositing their excess funds with central banks, in turn cutting their lending on the interbank market. But, what is a treasurer to do in this situation?

Did you know?

According to research by Orbis, in 2010 US corporates managed to hoard $1,639 billion in cash or cash equivalents on their balance sheets. In the same year, European corporates amassed €2,937 billion. To put that in perspective, as at 30thJune 2011, Greece’s debt stood at €354 billion.

Aside from the obvious steps of reassessing their cash positions, flows and processes, companies also need to re-examine their investment priorities for any surplus cash. After all, they are likely to be operating in a low yield environment for the foreseeable future at least. “In terms of looking at yield as an objective, when you read pronouncements from the European Central Bank, the reality is that nothing is going to happen to yield anytime soon,” says Mark Wyllie, Vice President of Corporate Finance at Central European Media Enterprises (CME). “It will be at least two more years before yield will start to begin stirring.”

Investment policies may therefore need to be revised, both in terms of objectives and permissible instruments/limits.

  • Which instruments is the company comfortable investing in now?
  • Do counterparty limits need to be revised?
  • Should yield even be a priority in an environment where risk perception is so high?

Peter Lay, Head of Treasury and Banking at the British Council, speaks for many treasurers when he says the security of his cash is his “primary investment objective.” Joanna Hawkes, Group Treasurer of Misys, a provider of financial software to the banking sector, agrees: “When Misys has had very significant amounts of cash to invest, as it did for several months last year, post the $1.3 billion sale of its US subsidiary and ahead of its auctioned share buy-back, it was all about security and far less about return. For smaller day-to-day investments we do look more closely at money market funds and competitive returns, but security is still paramount.”

Banks most exposed to peripheral1 Eurozone debt First half of 2011 ($ billion)

Source: Thomson Reuters Datastream

However, Hawkes adds that, “The key issue for me as Group Treasurer is still liquidity and ensuring that the company is always adequately funded and operating well within covenant levels.” It’s not just a question of being able to get your cash back therefore, it’s about getting your cash back when you need it.

Understandably, treasurers are hesitant about investing surplus cash for too long, in case the unexpected happens. Indeed, a number of European treasury functions now have 100% of their money available overnight or, at most, a period of one month.

But as Lay says, “It all comes down to whether your organisation is able to operate with sufficient monies in the right place – and at the right time.” What does this mean in practical terms for those looking to rethink their cash strategy? In brief:

  • Sitting on cash piles or ensuring all your cash is available to you overnight might seem like a low risk option but strategic cash management can be far more beneficial for the company.
  • Segment your cash appropriately into short-, medium- and long-term categories. For example, is the cash working capital or can it be held in reserve or for longer-term purposes?
  • Information relating to investment objectives and instruments should be detailed for each cash category within the company’s investment policy and guidelines. It is important to be clear about how each of the categories must be treated/invested. As stated above, investment policies may need revisiting to ensure they are true to the current climate.

Overall, the treasurer’s aim should be to identify and invest in the instrument types which offer the best and most appropriate investment opportunity for the cash, according to its intended purpose/category. It is important to discuss appropriate investment solutions with your bank(s) and or/investment advisers therefore – do not just rely on legacy strategies or instruments.

Corporate Interview

A treasurer from Greece speaks out

Marianna Polykrati

Group Treasurer, Vivartia
Vivartia logo

Marianna Polykrati, Group Treasurer at Greek food and drink conglomerate Vivartia, one of the largest companies in Greece, shares her views on deteriorating business conditions and how Vivartia is stepping up to the challenge.

With Greece in economic turmoil, how have you been monitoring risk recently? Have you been looking at CDS spreads, rating agencies or at other methods?

We were using CDS spreads at the beginning of the Eurozone crisis to monitor risk, but I think that the reliability of such a measurement has decreased right now. The market is experiencing huge volatility and is totally vulnerable to rumours.

I find that the rating agencies take a historical approach of companies; they do not take a forward-looking view – and we are a company that is forward-looking and forward-moving. Unfortunately, this aspect isn’t taken into account in their ratings.

Has your relationship with your banks changed since the Eurozone crisis began? Have you consolidated, diversified, or stayed largely the same?

Before 2008 we had relationships with 15 banks, as we are one of the largest groups of companies in Greece. With around €1 billion debt and a presence both inside and outside Greece, we had strong relationships with the six top Greek banks and with banks outside of Greece.

After the Eurozone crisis began and, indeed, after September 2008, banks outside Greece started to ‘keep an eye’ a little bit more closely on Greek companies. Pretty much, they focused strictly on the numbers and the financial performance compared to other companies outside Greece. It wasn’t easy handling the banks outside Greece.

Currently, we have a relationship with eight banks, and all of them are Greek. Our centralised treasury speaks with the banks’ relationship managers in general twice a week. But these days, with the turmoil in the markets, we speak with all of them every day.

What are you doing with your short-term cash now?

Our cash strategy hasn’t changed recently. Despite having a very efficient budget and cash flow plans, in such a volatile market you usually have a lot of unexpected events. So we are trying to keep a higher level of short-term cash in order to be able to tackle extraordinary events.

Is yield still an objective or is it all about security and liquidity?

Within Vivartia, we have companies that are cash cows and companies that are highly leveraged. For the cash cow companies, we do still look at yields; with the companies that are a little bit tight in liquidity, we focus mainly on that.

There is one problem in Greece, however: physical cash pooling is not permitted. We are a group that has 120 companies; but due to the current legal framework, we cannot pool cash between the entities and distribute the cash to the companies that need it. The tax imposed upon dividend distribution from the subsidiaries is high and therefore outweighs the benefits.

As a Greek company, in what ways has Eurozone turmoil affected your supply chain?

The Eurozone crisis has affected our supply chain in different ways, both abroad and domestically. It has changed the way suppliers abroad deal with us by squeezing our liquidity, since companies outside Greece request cash advances and do not accept Greek bank guarantees anymore. This change in the suppliers’ approach to Greek companies has been noticeable since October last year, when, as a group, we were starting to experience the reluctance of our suppliers to receive Greek bank guarantees.

Our supply chain is disrupted inside Greece as well. In general, the crisis has impacted a lot of our domestic suppliers, who have also experienced severe pressure from their suppliers in cases where the raw materials are purchased abroad. Furthermore, due to liquidity and regulatory issues Greek banks have squeezed their credit limits to our suppliers, so it’s a double effect on them, impacting us at the same time. We are one of the largest companies in Greece and one of the basic connecting links of the supply and demand chain of the Greek market, so we had available credit up to this year, but now it has become limited for us.

It has been said that the financial crisis expanded the duties and the importance of the treasurer; would you say the Eurozone crisis has heightened the importance of the treasurer’s role further?

It has, that is true. Currently the treasury has become the link between all the company’s departments. If we had a marketing decision in the past, it was something that remained in marketing. Right now, all the decisions pass through the treasury; in terms of cost and liquidity and payment terms, especially how far you can ‘push’ all the payments.

Is there any advice you would like to give to other treasurers on how to make the most out of the current situation?

One of the dangers facing companies is that we do not know what to hedge against, because of the instability in the market. We do not know whether the euro is going to continue to exist; so you try to make a contingency plan against a very unstable market.

The focus right now for Vivartia is around 70% liquidity – that is the immediate danger – and 30% hedging. We are in a very volatile market, and we don’t know if the banking system will continue to exist in its current form.

My advice to treasurers is to be patient. Do not panic and try not to be affected by all the rumours going around. You have to filter everything that you hear and read right now.

Counterparty risk and bank relationships

Counterparty risk, and the difficulty assessing it, is at the heart of this crisis. The time spent communicating and networking with financial institutions can be of the utmost importance if events take a turn for the worse. “Relationship banking has always been important,” says Hawkes “and I am certainly of the school that in the current climate strengthening those relationships is all the more important. It helps on every level; if the banks understand your business, they can react much more quickly when you need them to. This is significant if you are as active in M&A as Misys is and in a market characterised by the increasing rationalisation of capital.”

“If you know each other well you can keep the number of relationships lower,” Hawkes adds. “You can then maximise the amount of ancillary you have to spread around which further supports banks’ capital return and therefore their scope to lend.”

In other words, keeping your banks updated and aware of your strategic direction, allows your business to gain credibility and therefore easier access to credit facilities at short notice. Questions for treasurers to ask themselves include:

  • How frequently do you meet with your banks?
  • Are your banks attending your analyst meetings?
  • Do they receive regular exposure to your CFO or CEO?

However, for some treasurers, relationship decisions are influenced by counterparty risk policies (see box below) that limit the amount of business that the company can do with any bank, in particular when it comes to deposits.

“We have tweaked our policy so we are spreading the amount of cash to no more than 20% of six deposits with any one bank,” says one corporate treasurer, whose business operation deals in 110 currencies. “We have increased the number of banks we operate with. Before the crisis we were incredibly conservative with the banks we had. But with our policy of trying to spread our risk, we had to start looking elsewhere.”

Where your peers are putting their cash?

Local opportunities

For corporate treasurers operating in small countries – be they member states of the European Union or located just outside its periphery – local state banks are becoming increasingly attractive as safe havens for cash. Local financial institutions deemed by national governments as ‘too big to fail’ and systemic to the local banking system are relatively safe bets, it seems.

Wyllie, whose business primarily operates in six eastern European countries, such as the Czech Republic and Slovakia, says the following: “We have started to leave a lot of our cash down at the local level – such as local banks in the Czech Republic, for example, or the sub-branches of other, larger banks such as ING – rather than the usual pre-2008/9 strategy of regrouping the cash in the big international banks.”

Could we perhaps be seeing the start of a decline in cross-border pooling requests as companies pursue this approach? While it is early days yet, it is evident that the crisis is forcing treasurers to be more resourceful with their cash and to rethink legacy processes and strategies.

Money market funds

“In terms of day to day operational cash, if we were going to go for £10m to £20m – small amounts of cash like that – we have started looking actively at money market funds,” notes Hawkes. While the yields on MMFs may seem low at the moment, this is because AAA rated MMFs focus primarily on capital preservation and liquidity.

Covered bonds and non-periphery debt

Some corporates are genuinely questioning whether their banks are still solvent. Indeed, one of our sources, who asked to remain anonymous, said his business is conducting daily reviews of its credit limits, which have been gradually reduced as the Eurozone crisis has progressed. With bank deposits seen as increasingly risky, the other options remaining are government bonds – at least, those from Germany, Austria, Finland and the Netherlands – and covered bonds. The former option offers little in the way of return – a two-year German bond, for example, currently offers 0.65% – but there is nevertheless some security.

Covered bonds, he says, are a more attractive alternative. These are debt securities, generally issued by a bank, that are secured against collateral. Therefore, if a bank eventually defaults, and its national government is unable to support it, the investor is entitled to that collateral as compensation for his investment. This simple logic, which takes into account potential bank default, is now driving certain corporates to purchase covered bonds instead of putting their money on deposit with banks – while taking advantage of the extra yield. Indeed, one treasurer interviewed said he was placing 50% of his money in covered bonds, with the remaining half in non-periphery sovereign debt.

Thinking outside the box

In early September 2011, the FT reported that Siemens withdrew more than €500m from Societe Generale, transferring the sum to the ECB for safekeeping. The unusual move, which came amid growing worries about the European banking system, was possible only because the German industrial group acquired a banking licence in 2010, one of a handful of companies to do so. This move was in large part a reaction to the difficulties faced during the global financial crisis.

To date, Siemens is reported to have placed between €4 and €6 billion with the ECB, largely in one-week deposits, thus using the central bank for liquidity and as a safe haven for cash deposits. Furthermore, the industrial group can avail of higher interest rates offered by the ECB. It is an extreme example, but nevertheless highlights the innovative methods that companies are devising in order to tackle the crisis head on.

Getting market risk savvy

Elsewhere, which danger signals should treasurers be on the lookout for to help their business survive? “The indicators that are most useful are the actual quantitative measures that don’t necessarily hit the newspapers,” says Wyllie. The movement of credit default swap (CDS) spreads, for example, has often predicted the eventual outcome of a country’s fortunes, be it Ireland, Portugal or Greece.

But CDS spreads only offer a snapshot of the economic situation, reflecting market sentiment at any given moment. It is impossible to predict where they will be a month, or even a week, from now. “It is a bit like asking where the US dollar is going to be in a year’s time,” quips one corporate treasurer. “One bank will give you 1.70 or 1.80, and another bank will value it at 1.35.” Furthermore, with the poor track record of econometric forecasting pre-2008 providing little comfort, treasurers also need to look elsewhere to support their risk strategies.

The qualitative decisions of the three leading ratings agencies – Standard & Poor’s, Moody’s and Fitch – have continued to play a formative, if disruptive, role in the path of European debt crisis events. “The ratings agencies might suffer from a credibility issue, but markets still pay attention to their decisions. They have no choice but to,” says Lay at the British Council.

“While we wouldn’t place as much reliance on them [S&P, Moody’s and Fitch] today as we would have done in the past, we still factor them into our decision-making. We would be less dependent, however, and give a much more subjective overview to risk management,” says one corporate treasurer.

Furthermore, frequent downgrades by these ratings agencies are likely to have an additional impact for treasurers. With fewer banks now holding a AAA credit rating on their debt, corporates must bear in mind the following:

  • In a few months’ time, will it still be possible to avoid doing business with banks that are not AAA rated?
  • What level of credit rating will become the new, accepted norm in this case?
  • Also, will this simply devalue the notion of credit ratings even further?
  • Where does the balance lie between counterparty loyalty and the need to secure your company’s exposure?
  • Should the company be relying more on its own analysis of its banking partners?

Certainly, the market has not yet shifted to such a mind-set, but a gradual adjustment in this direction is likely.

Eurozone bond yields

Ten-year government bond yield %

Source: Thomson Reuters Datastream

Managing supply chain exposures

Since 2008 buyers have become increasingly aware that the cost of sustaining a supply chain is often less than that of seeing it collapse. This means actively looking for ways to support your suppliers through the tough climate. Supply chain finance, or at least a particular form of it – supplier finance – has therefore risen in prominence and popularity.

However, with the bailouts of Ireland, Portugal and Greece, the Eurozone crisis poses other threats to a company’s supply chain. Greece, in particular, caused considerable consternation among our interviewees. There is strong market speculation that Greece may be forced to leave the Eurozone, which in turn calls into question the reliability of existing deals with Greek suppliers, as highlighted above. It is no surprise therefore that letters of credit are growing in popularity again, even for trade within Europe.

In reviewing supplier relationships and trade contracts, it is also important to examine not only the direct threats to the company (ie a supplier based in Greece) but also other indirect risks:

  • Know the extent of your company’s counterparty exposure and understand how suppliers may be affected by another recession/market downturn. Use supplier scorecards where appropriate.
  • Look at physical trade flows as well as the financial flows. Is just one company used for shipping 90% of the time? What if the company went bust? Is there a backup plan?
  • Make sure all parties are clear on the terms of their trade agreements. When is the ownership of goods transferred and who is responsible for arranging the insurance?

Now is also an ideal moment to ensure your company’s sales and procurement departments understand the importance of the supply chain to the business. As a longer-term project, companies could also look for ways to improve supply chain visibility: ranging from a commercial card programme to supply chain software.

Technology: worth the investment

Treasury management systems have been instrumental in allowing corporates to react more quickly to recent market events. The right treasury technology can increase efficiency, transparency and control over the department’s operations – and, of course, the company’s cash.

The hardest part of technology is sometimes not the implementation but securing the budget for it in the first place. The following points are just some of the benefits that a new TMS can offer, and can be useful for building an argument around the replacement of a legacy system:

  • An improvement in risk management, such as operational, counterparty and financial risk, enabling treasurers to better model the effects of different hedging, borrowing and investment decisions.
  • Increased visibility of cash across the business, allowing companies to see their accurate, up-to-date cash position. “We are looking at trying to improve our cash flow forecasting with simpler models for people to use, because we do it in over 100 countries,” observes Lay, who has successfully implemented 360T.
  • More efficient system capabilities, enabling businesses to meet accounting and regulatory reporting requirements more readily.
  • Automation of processes, which leads to an increase in labour productivity allowing staff to be re-deployed away from repetitive manual tasks towards value-added activities. Misys completed its first phase IT2 implementation in September last year [as the Eurozone crisis was taking off]. “IT2 has been very successful,” says Hawkes. “It has forced a lot of much needed automation and process improvement, but it’s an ever developing discipline. Misys is based all over the world, operates in virtually every currency and runs exposures and hedges in all currencies with significant P&L implications. “Our inter-company cash flows and cross currency IP recharges are massively complex. The more we can automate the processes around managing these, by using the system, the better visibility and understanding we have and ultimately better control on the holy grail of P&L volatility on revaluations.”
  • Improved integration with third party systems, such as ERP and accounting systems. This leads to improved STP rates, fewer errors and reduces the need for rekeying data.

With the concerns surrounding bank counterparties, corporates may also want to reconsider SWIFT Corporate Access. One of the advantages of SWIFT for Corporates, for example, is that the use of a non-proprietary connection means that the corporate is less tied down to a particular bank.

Survival of the fittest

Whether the euro’s problems are resolved through a united front or through break-up, what is clear is that the companies that are best prepared and in an optimal state of health will have the greatest chance of growth. While some lucky cash-rich organisations will be able to take advantage of the challenging environment and acquire their competitors at bargain prices, the rest will soldier on and look for organic opportunities.

Here is Treasury Today’s round-up of survival essentials:

  • Do not think a euro break-up is out of the question.

    It may be unlikely, but nothing is inevitable. Revisit our tips on contingency planning as your first port of call.

  • Initiate a detailed overview of your cash position.

    You may be surprised (pleasantly, even) by what you discover. If you can’t measure and monitor your cash performance, then you can’t be in a position to optimise it.

  • Do not delay any drive towards centralisation.

    Not only will centralisation present significant opportunities for economies of scale as well as efficiency gains, it will also enhance overall control. Leverage this crisis to overhaul your treasury structure where possible.

  • Consider innovative ways of keeping the company’s supply chain healthy.

    Supplier finance or even vendor finance may be appropriate. Such programmes will also be easier to implement in a centralised treasury environment.

  • Explore the benefits of local institutions.

    ‘Too big to fail’ is a relative concept; local financial institutions, deemed systemic by smaller states, may present interesting opportunities for depositing cash.

  • Think again about yield.

    With smarter strategies on where to place your cash as well as maturity periods, there is still an opportunity to achieve some return. At the same time, investment expectations should be realistically adjusted and investment policies may also need tweaking.

  • Use the Eurozone crisis to your advantage.

    Perhaps as a means to put forward a strong case for more efficient resources in the treasury function – from new technology to new staff.

  • Listen to your peers.

    Talk to other treasurers about their experiences and how they are changing the way they operate. This kind of insight really can be invaluable.

  1. Greece, Ireland, Italy, Portugal, Spain.

Eurozone crisis timeline

To tie in with this week’s publication of our ‘Eurozone: Treasurers’ Survival Guide’ supplement, we have compiled a timeline of the key events of the Eurozone crisis.

  1. January 1999 The euro is launched into action with great political fanfare and hailed as the one of the singular achievements of the European Union (EU). At the time, sceptics of the European Monetary Union (EMU) argued that the single currency was foremost a political project, with economics taking the back seat; significant structural weaknesses, such as the lack of a fiscal union, were built into the euro’s foundation. These voices, however, were a minority amid the jubilation of the new currency.
  2. January 2001 Greece becomes the twelfth country to join the Eurozone. While the expansion of the EMU is welcomed, the country’s history of fiscal irresponsibility highlights concerns among some commentators that, once a country has entered the EMU, there is no longer any incentive to continue the reform of its economy and public finances. The Growth and Stability Pact, a Eurozone agreement, often called the ‘golden rule,’ that limited budget deficits to 3% of GDP, is criticised as being not powerful enough to restrain member states’ fiscal spending.
  3. November 2004 The Greek government admits that it misled Eurozone member states over its apparent achievement of meeting the fiscal requirements for entry into the EMU. New statistics are released which reveal Greece’s budget deficit has never been below 3% since 1999, in effect breaking EU entry rules. The disclosure hints at future trouble down at the line.
  4. March 2005 After successfully hosting the Olympic Games in Athens the year before, Greece’s spending programmes take their toll. A new government, led by the right-wing New Democracy Party, imposes an austerity budget amid efforts to put the country’s public finances back on track.
  5. September 2008 The structural weaknesses of the euro, such as the lack of a common fiscal system and poor wage and price flexibility across Eurozone member states, erupts in the aftermath of the Global Financial Crisis (GFC) – symbolised by the collapse of Lehman Brothers in September 2008 – following almost a decade-long strategy of low interest rates pursued by the European Central Bank (ECB). Enormous amounts of private debt are transformed into public debt by means of bank bailouts, and the burdens of several Eurozone governments increase substantially.
  6. December 2008 Since joining the Eurozone, Greece attracts sustained criticism from economists for its apparent reluctance to reform its economy and poor management of its public finances. Economic difficulties culminate into riots erupting in Athens as the Greek government imposes a budget aimed at cutting its public debt which, at 93% of GDP, is one of the highest in the EU.
  7. October 2009 With the Greek political establishment straining under sustained market pressure and allegations of corruption, the Socialist party wins a snap general election in October 2009 pledging a €3 billion stimulus package to revive the country’s ailing economy. Heavy selling of Greek stocks and bonds commences as fears mount over Greece’s alleged unwillingness to tackle its deteriorating public finances.
  8. December 2009 The Eurozone crisis enters a new, more uncertain phase as Fitch and Standard & Poor’s, two leading ratings agencies, downgrade Greece’s credit rating. The downgrades spark a fresh wave of selling in bond markets, highlighting not only the persistent debt problems of Greece, but also other European states as well, such as Ireland and Portugal. George Papandreou, the new Greek prime minister, admits in December that his country’s 2009 budget deficit stands at 12.7%, twice the figure previously published.
  9. April 2010 Standard & Poor’s downgrades Greek bonds to junk status citing serious concerns over the country’s deteriorating finances and its poor economic outlook. After months of resisting EU pressure to accept international aid – and having been shut out of bond markets by means of prohibitive interest rates – Greece capitulates, making a formal request in late April to the EU for a bailout.
  10. May 2010 The Greek government receives a bailout package to the value of €110 billion for a three-year period, backed by the EU and the International Monetary Fund (IMF), as part of a wider commitment of €750 billion of emergency measures. Among actions taken was the creation of the European Financial Stability Facility (EFSF), a temporary institution backed by €440 billion in Eurozone guarantees, designed to stem market contagion to the periphery. Greek ten year bond yields fall from a peak of 12.23 to 7.31%. The bailout, however, ultimately fails to assure markets. In a significant and controversial expansion of its remit, the ECB announces that it will purchase Greek, Irish and Portuguese government bonds in the secondary market in an effort to calm the crisis. Given that the ECB is forbidden by its constitution to finance European governments directly, the central bank’s executive board argues that it will sterilise its purchases of government debt by withdrawing equivalent amounts of liquidity out of the market, so as to neutralise any inflationary effect. Nevertheless, the move is greeted with strong opposition by Axel Weber, president of the German Bundesbank, who voices his hostility to the ECB’s unprecedented move into fiscal territory.
  11. July 2010 In an attempt to restore market confidence the EU publishes the results of its bank stress tests on the leading financial institutions in Europe, designed to examine whether European banks can withstand another severe economic shock. Only seven out of a total of 91 banks examined fail to meet the proposed capital requirements, among them Germany’s Hypo Real Estate and Greece’s ATEbank. The results are greeted with scepticism by the market and the stress test fails to restore confidence in the Eurozone banking system, with many analysts arguing it was not strict enough.
  12. November 2010 Ireland becomes the second Eurozone member state to be bailed out by the EU and IMF, stoking further panic in the market. The €85 billion package is dependent on the Irish government slashing public spending and reigning in its government deficit that soared in the aftermath of its property bubble collapse. Meanwhile Greece’s public debt soars to over 142% of GDP, demonstrating further the ineffectiveness of the bailout package earlier in the year.
  13. March 2011 European leaders approve the creation of the European Stability Mechanism (ESM), a permanent €500 billion bailout fund that is set to replace the temporary EFSF when it expires in 2013. Analysts welcome the development as a belated recognition that Europe requires concrete, permanent measures to tackle the Eurozone crisis.
  14. May 2011 Portugal is bailed out by the EU and the IMF. After the rescue package is announced, the market begins to turn on larger Eurozone economies, such as Spain and Italy, convinced that European leaders are unable to assert control over the crisis.
  15. June 2011 The yield on Greek ten year bonds continues its steady ascent, hitting 17.78% in mid-June. Standard & Poor’s cuts Greece’s credit rating to CCC and places the country on a negative outlook over persistent concerns that Greece will default on its debt. The Greek prime minister calls for a second bailout in order to save the Greek economy.
  16. July 2011 Greece receives a second bailout after political agreement is reached by Eurozone leaders at an emergency summit in Brussels. The settlement calls for an additional loan package worth €109 billion; the extension of Greece’s repayment terms and a reduction in the cost of servicing its debt; the participation of the private sector in reducing the country’s debt burden; and the granting of new powers of the EFSF to purchase bonds and offer emergency lines of credit to solvent Eurozone countries. In response, however, Greek ten year bond yields fall only 300 basis points to 14.71%. Once again, the new rescue plan is criticised by economists as an inadequate response to the gravity of the crisis. The results of the European Banking Authority’s second bank stress test are also released in July revealing that 8 out of 90 financial institutions in Europe failed to pass the mark. The tests again fail to instil confidence in the market, with many market analysts questioning the credibility of the assessment.
  17. August 2011 The ECB announces that it will buy Spanish and Italian bonds, reactivating its once dormant bond purchase programme of 2010. The commitment is a substantial undertaking given the size of the two economies and leads to questions as to whether the central bank has the firepower to realise its aims in reducing bond yields. The ECB’s actions constitute the first official recognition by European officials that the Eurozone crisis is spreading towards the heart of the continent.
  18. September 2011 The Eurozone crisis takes on a new momentum with the political framework, both at the European and national level, showing cracks amid escalating turmoil in the market. Jürgen Stark, a member of the executive board of the ECB, resigns in protest against the central bank’s ‘unorthodox’ policy of bond purchases, a development which highlights the deep divisions within the ECB over its Eurozone rescue strategy. Italy’s credit rating is downgraded from A+ to A due to the unstable political environment in Rome, while Spain implements a constitutional amendment to keep future budget deficits within a strict limit, with the hope of assuaging market fears about its economy. In mid-September, two French banks, Société Générale and Crédit Agricole, are downgraded by Moody’s due to concerns about their holdings of Greek debt. The downgrade fuels market tension as Eurozone leaders grapple to contain the contagion, and leads to calls that the European banking system – its books laden with Greek debt – should be recapitalised. Meanwhile the slowdown in the German economy (in the third quarter) adds to Eurozone woes, suggesting that even Europe’s strongest economy faces trouble, further restricting the available avenues to European recovery.
  19. October 2011 Leaders impose a deadline for late October to end the Eurozone crisis decisively. The crisis has now evolved into three intricately-linked issues: the urgent need to implement a second bailout for Greece; recapitalisation of the European banking system; and the creation of a firewall, in the form of an empowered EFSF, to contain the economic crisis.
  20. November 2011 The Greek government makes the shock announcement of a referendum on the country’s EU membership. In response EU leaders suspend the €8 billion bailout tranche to the embattled country while uncertainty remains. Papandreou’s gamble fails to pay off and his government collapses. Stock and bond prices tumble in Europe, America and Asia. Markets immediately turn on Italy with ten year bond yields rising to above 7.5%, an unsustainable level that saw other periphery economies succumb to bailouts. Silvio Berlusconi, the Italian prime minister, is forced to while Mario Monti, a former European Commissioner, is selected to lead an emergency government. Meanwhile Lucas Papademos, a former president of the ECB, heads a new interim administration in Greece. These developments arrive within days of the new ECB president beginning his tenure at the helm of the central bank. Mario Draghi faces the challenge of balancing an effective crisis rescue plan with the central bank’s reputation for a hawkish stance on monetary policy. The crisis enters a new phase after a German bond auction fails to attract a number of buyers, with one third of the bonds left unsold. In late November central banks across the globe surprised markets with a co-ordinated action to avert a pending liquidity crisis. The Federal Reserve cut the rate at which the ECB borrows short-term dollar loans from 1.1% to 0.6% in an effort to alleviate funding issues for European banks. Stock markets rally with Germany’s DAX jumping 5.4% and the Dow Jones Industrial Average soaring by 409 points.
  21. December 2011 At an emergency summit in Brussels on 9th December, Britain vetoes proposed treaty changes concerning the creation of new fiscal compact. Made on the grounds of national interest, the British move means that a two-speed Europe is now an economic reality. The remaining 26 EU member states vow to press on formulating an intergovernmental treaty ensuring strict budgetary discipline aimed at solving the crisis. European leaders also decide that the €500 billion ESM will be brought forward by one year. The rescue fund will now become operational in July 2012. Markets react cautiously to the agreement reached at the summit; by the following Monday enthusiasm already begins to wane. Meanwhile, the ECB cuts interest rates by 25 basis points to 1.0%. In response to the deteriorating funding conditions in the European banking system, Draghi announces additional emergency measures, such as extending ECB bank loans up to three years and relaxing the rules for bank collateral so as to ensure easier conditions for banks to access ECB liquidity. A consensus now gathers among Eurozone finance ministers that the ECB must form the backbone of Europe’s response to fight the crisis. The ECB thus far refuses to become lender of last resort, stating that the crisis is foremost a fiscal problem, to be solved in the capitals of Europe.



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