Multinational corporations are the most foresighted supranational entities taking prudent precautions for a stampede out of the euro. The lack of contingency planning among other relevant parties is sadly unsurprising. The UK is a happy exception, so perhaps the Crown relishes the prospect of returning to its historic role as the balance of power on the Continent. The Brits may have their work cut out for them.
I for one relish the prospect of many stupid European private equity firms going out of business. A lot of LBO operators are very precariously overleveraged. That is music to my ears. It means that anything they own will be available at fire sale prices once they go bust. It also means that there won’t be as many Euro-trash wanna-bes making snide remarks about my lack of a pedigree at black-tie events in San Francisco. They won’t be able to afford tickets if they’re out of work. I have no plans to go hunting right away for bargain properties in Europe, although I suspect the dollar will go a lot farther over there this summer. I’d rather wait for the follow-on effects here in the U.S. if European LBO shops have to exit U.S. equity positions in a hurry. Investors are already shutting off the flow of capital into the high yield debt that LBO shops prefer and redirecting it into the no-yield bond havens that won’t outlast hyperinflation.
Successfully navigating a government through a political crisis boils down to the character of top leadership. I suspect that only Angela Merkel and Christine Lagarde have the requisite nerve to stay the course. Everyone else is going to bail. Whatever new leaders Greece elects in June will be the first to head for the exits. The single currency isn’t ready to become a museum piece just yet. It’s been a boon for Germany and still has a role in deterring French irresponsibility. The most realistic end game is the one I sketched out months ago, with a devolution to a “rump euro” roughly contiguous with the original Holy Roman Empire.