German industry starts to advocate Greek exit from eurozone

[FRANKFURT] German industry is beginning to call for Greece to quit the eurozone, having already pared back what business it had there, and now fearing that a continuation of the crisis could spoil a nascent recovery in the rest of Europe.

"A Greek exit from the eurozone can no longer be taboo," said Matthias Wissmann, president of the powerful German automotive industry association VDA.

"It could - if combined with a wise future strategy from the euro countries - even contribute to the stabilisation of the eurozone ... The markets need dependability," said Mr Wissmann, also vice-president of the German industry umbrella organisation BDI.

The glimmer of a divergent view by a group that generally sticks close to government policy coincides with a growing sense that even Chancellor Angela Merkel may not be able to keep Greece in the eurozone, despite new proposals following Greece's default on a loan from the IMF on Tuesday.

A snap referendum to be held next Sunday on the conditions demanded by Greece's lenders in return for more cash is seen by most European officials as tantamount to a vote on whether or not to quit the eurozone.

Die Familienunternehmer, which represents the 180,000 family-owned businesses who are the backbone of Germany's export-led economy, said the latest developments vindicated its opposition to the European Union's bailouts for Greece.

"Our collective efforts must now be applied to an orderly exit of Greece from the euro," it said. "The way the euro is handled has an effect on German companies and how they do business," its chief economist Daniel Mitrenga said.

"We never favoured the 'domino thesis' that all these other countries would collapse if there was a Grexit."

The shift in attitude partly reflects the fact that German companies have sharply reduced their Greek exposure in recent years.

Total German exports to Greece were just 5 billion euros last year, accounting for less than half a per cent of total German exports, and Greece slid to 38th from 34th in the ranking of Germany's export partners.

Fears that a Greek exit could unleash market chaos are starting to yield to the worry that prolonged uncertainty will endanger economic recovery in Spain, Portugal, Ireland and even Germany.

"The escalation in the Greek crisis could really hit the upturn in this and the coming year, possibly causing it to end prematurely," said Gustav Horn, head of Germany's IMK macroeconomic policy institute. "A Grexit or the agony caused by uncertainty could dramatically change the economic picture."

The head of the VDMA engineering association, whose members exported just 360 million euros' worth of goods to Greece last year compared to 680 million in 2008, said: "From a purely markets point of view, a Greek exit from the euro would be manageable for German machinery and equipment builders."

It said that even in shipbuilding, an important market for German suppliers as Greece still awards some of the biggest contracts in the world, shipbuilders almost always had their accounts abroad, so that a Grexit "would barely have an effect".

More immediately, even if Greek trading partners stop paying their bills, German companies have little to lose. "Mainly, they're prepared, they saw it coming," said Michaela Balis at the Athens office of the government agency Germany Trade & Invest. "Two years ago, companies with operations here already limited the cash they have here to what was necessary for day-to-day operations," she said.

Deutsche Telekom - the most exposed German firm, with 40 per cent of Greece's biggest telecoms firm OTE - said it ran the carrier as a self-financing, standalone firm. It spent 4.2 billion euros on the stake and has written off 2.6 billion.

Industrial group Siemens, which has been active in Greece since 1900 and won one of its biggest post-war contracts to supply rail equipment there in 1956, has scaled back, partly as a result of divestments and a bribery scandal.

Siemens' sales in Greece in the last financial year were 120 million euros, less than 0.2 per cent of group revenues.

Drugmaker Bayer said: "The total fall-out is manageable. The share of Greek business in our group revenue is a fraction of 1 per cent. We continue to supply vital products such as medicines."

REUTERS

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