Greece crisis ripples across European companies as markets swing

Customers queueing to withdraw cash from ATMs outside a main branch of the National Bank of Greece SA.
Customers queueing to withdraw cash from ATMs outside a main branch of the National Bank of Greece SA.PHOTO: BLOOMBERG

LONDON (BLOOMBERG) - Greece's financial turmoil rippled across corporate Europe as a market rout sabotaged planned bond sales and stock offerings and threw companies into crisis-response mode to deal with unsettled customers.

German real-estate investor ADO Properties shelved its planned initial public offering, citing volatile markets, while Adler Real Estate halted plans to sell a convertible bond to shareholders. Travel companies TUI AG and Thomas Cook Plc fielded calls from travelers about access to cash after Greece introduced capital controls to prevent bank collapses.

The crisis is "paralyzing decision-making in Europe," threatening jobs and slowing economic growth, said Ulrich Spiesshofer, the chief executive officer of Swiss engineering company ABB Ltd. Many ABB clients are rattled by the situation as the Greek crisis adds to a slowdown in China and uncertainty about the economy in the U.S. and U.K., the CEO said.

While Greece represents only a small market for most major European companies and executives have been able to prepare for a direct fallout for years, the crisis has called into question the economic stability of the entire region sharing the single currency. Greece's financial collapse could spread instability to much more consequential economies like those of Italy, Spain, or even France.

"The real risk is that the crisis in Greece triggers broader contagion to the euro zone and global financial markets," said Neil Shearing, an economist at Capital Economics in London.

Some European companies are actually preparing for increased Greek demand. Dutch dairy-products producer Royal FrieslandCampina NV said it's increasing its supplies in the country as nervous Greeks stock up on basics like powdered milk and baby formula.

European tourists are meanwhile reconsidering their journeys to one of the continent's most popular summertime destinations.

"Increasingly people are asking the call center whether than can still go," said Hanita van der Meer, a spokeswoman for tour operator Thomas Cook. "There has been some decline in bookings, but not in the extremes" - although the company is advising travelers to bring more cash from home.

Some of the effects were more mundane and a logistical nuisance than a hard corporate decision. In Berlin, Siemens AG scrapped a long-planned speech by its chief technology officer, saying the audience would be more preoccupied with the latest in Greece than with innovation from the German engineering giant.

Greece introduced capital controls on Monday that limited cash withdrawals and the transfer of money abroad. Prime Minister Alexis Tsipras called a July 5 referendum on what he has called a vote on austerity, effectively deciding his country's future in the single currency.

About US$1.5 trillion was erased from the value of global equities Monday, the most in two years, after Tsipras called the shock vote. With some experts putting the odds of a Greek exit from the euro zone as high as 85 percent, Europe faces a week or more of high drama that could threaten the integrity of the world's largest currency bloc.

"This situation can't carry on much longer because someone has to recognize that like this there can be no winners," said Boris Boehm, a fund manager at Aramea Asset Management in Hamburg. "It's two cars driving toward each other at full speed and no-one's willing to change direction."

Executives representing industries from beverages to advertising said they have spent the last years whittling down their activities in Greece as the country's economic crisis deepened. Ivan Menezes, the CEO of beverage company Diageo Plc, said its Greece business is today only a quarter of the size in net sales that it was in 2008.

"Greece is 0.1 per cent of our revenues and falling as a percentage," said Martin Sorrell, the CEO of advertising group WPP Plc. "We've had enough time to plan!"