Thursday 8 December 2011

Tesco plans for eurozone break-up?

According to the Telegraph, Tesco is shifting its currency exposure, holding cash and refusing to sign long-term supply contracts in the face of the eurozone crisis.
The retailer is thought likely to have cut its euro holdings and moved cash into safer currencies such as the dollar or sterling, as well as better managing its exposure to eurozone suppliers.
Add to this the latest report in the Wall Street Journal that ‘Some central banks in Europe have started weighing contingency plans to prepare for the possibility that countries leave the euro zone or the currency union breaks apart entirely, according to people familiar with the matter’.
The fact central bankers are even studying the possibility, which until this autumn  was considered unthinkable, underscores how swiftly conditions have deteriorated.
At least one - the Central Bank of Ireland - is reportedly evaluating whether it needs to secure additional access to printing presses in case it has to churn out new Punt bank notes to support a reborn national currency. A denial was issued by the bank this morning.
The reason for the focus on printing is because should a decision be made to revert to a pre-euro currency, it is vital that ATMs begin to issue the new currency immediately to avoid a run on the banks…
Then comes a 50+% devaluation in order to drive up exports, and queries re the payment of sovereign debt…
Otherwise, there is no point in making the change…

Got to be worth a 'what if' on the impact on your categories and customers?

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