Report: Greek Crisis Damaged EMU in Non-Eurozone States

The Greek crisis that kept politicians busy in the summer of 2015 has fuelled particularly negative sentiments among business leaders from the non-eurozone countries, according to a report by Deloitte published today (16 November).

A second edition of the European CFO survey, gathering opinions from 1,300 chief financial officers from leading companies from 15 countries, highlights concerns about the stability of the euro area.

The authors of the report asked CFOs on how events in Greece have affected the EU’s monetary union in the longer term. Almost one in two CFOs (48%) said recent events have damaged prospects for creating a stable and integrated European monetary union. Only 17% believe the solution of the Greek crisis has improved prospects.

Sentiments are particularly negative in Poland, the only country from Central and Eastern Europe surveyed. Poland is also the largest economy of the new EU members, who have a legal obligation to join the eurozone.

83% of the Polish CFOs, by far the largest proportion among the 15 countries surveyed, said the Greek crisis damaged prospects for achieving a stable and closely integrated European monetary union in the middle term. Only 11% said it had improved prospects, and 7% said it had no effect.

In contrast, the most optimistic CFOs are in France and Italy. Only 23% of French CFOs say the Greek crisis had a negative impact on the Eurozone, with 10% saying it had improved prospects and 67% that it had no effect. In Italy 38% said it had damaged prospects, 29% that it had improved prospects, and 34% that it had no effect.

Michael Grampp, Director of the CFO survey and Chief Economist for Deloitte in Switzerland, explained that unlike CEOs who tended to be more optimistic, CFOs gave more accurate and neutral answers.

In fact, in Poland the Eurosceptic Law and Justice party (PiS) who won the 25 October election opposes joining the euro zone in the near future.

The European CFO survey covers also several other topics, the overarching theme being the sentiments on Europe’s financial prospects. It finds that sentiment has fallen most in Northern European economies including Belgium, Finland, France, Germany, the Netherlands, Norway and the UK.

This fall in optimism is explained by the weak export outlook for these countries, also due to the slowing of the Chinese economy. It is interesting to note that the perception of financial uncertainty in Germany is the highest among the 15 countries surveyed.

In contrast, CFOs in Ireland, Italy, Poland, Portugal and Spain are the most optimistic. Capital investment intentions and employment intentions in these countries are stronger than in the Northern economies.

External risks and geopolitics

It also appears that when asked about the top risks to their businesses over the next 12 months, CFOs from across Europe frequently mention the geopolitical risk.

As an example, “geopolitical risk” is the mentioned among five possible risks by Austria, Finland, Germany, Poland and Switzerland. The countries where CFOs did not mention geopolitics are Belgium, France, Ireland, Italy, Norway, Portugal, Spain and UK.

In the UK, a specific risk mentioned by CFOs is the UK referendum on the country’s membership in the EU.

Russia is one of the countries surveyed. The Western sanctions do not appear as a specific risk mentioned, but the five “Russian” fears appear as follows: “Stress in the financial system”, “Weak Russian rouble”, “Weaker domestic demand”, “Organic profit decrease” and “Deterioration of cash flow”.

It also appears that the report could not take on board sentiments surrounding the political uncertainty in Portugal, following the collapse of the centre-right government and the expectation that anti-austerity forces will be represented in the next cabinet.
(source: CFO, euractiv)