Swiss, Germans Set To Unleash Capital Controls As European Companies Prepare For Euro End

Tyler Durden's picture

Even as Eurozone leaders attempted to instill some meager sense of accomplishment following the latest (but certainly not last) Euro summit culminating with yet another 7-page term sheet which achieved absolutely nothing, and in fact succeeded in alienating the UK even more, the real game continues behind the scenes. And it is a game which the euro looks set to lose. As Bloomberg reports, in the aftermath of the Telegraph's latest report confirming what has been said here all about the collateral crunch in Europe, Europe's CEO are now actively preparing for the worst case outcome: the end of the Euro (despite UBS' and other banks' repeated calls that such an event would result in an end of the world). To wit: "Grupo Gowex (GOW), a Spanish provider of Wi-Fi wireless services, is moving funds to Germany because it expects Spain to exit the euro. German machinery maker GEA Group AG is setting maximum amounts held at any one bank. “I don’t trust Spain will remain in the euro zone,” said Jenaro Garcia, founder and chief executive officer of Madrid- based Grupo Gowex, which provides Wi-Fi access in 15 countries. “We moved our cash and deposits to Germany because Spain will come back to the peseta"... Contingency planning for an unraveling of the currency involves cutting investment, moving money to Germany, transferring headquarters to northern Europe from southern, and even going out of business." And to all the chatterboxes on CNBC repeating ad inf that a Eurozone collapse would be "manageable" here is a person who actually knows what he is talking about: "“How do you control an explosion in a controlled way?” Fiat SpA (F) Chief Executive Officer Sergio Marchionne told reporters in Brussels on Dec. 2. “That’s a contradiction in terms. This will be an implosion of some size with potentially disastrous consequences." He is right, and while the outcome is certain, it will not stop Europe's financial leader Germany from intervening in an attempt to prevent a surge in Deutsche Marks once the currency returns, and will likely set up capital control measures - that last bastion to every failing monetary system - to halt what is sure to be a record inflow of post-collapse DEM appreciating capital.

From Bloomberg:

The Bundesbank, Germany’s central bank, registered capital inflows of 11.3 billion euros ($15 billion) from non-banks in September, according to the breakdown of its current account published Nov. 9. That helped transform a deficit of 47.3 billion euros in Germany’s balance of other capital flows in August to a surplus of 700 million euros in September.


In another bid to end the debt crisis, European leaders added 200 billion euros to their warchest and tightened anti- deficit rules in what they called a “fiscal compact” at a meeting in Brussels. European stocks dropped and the euro was little changed as the plan disappointed some investors.

And confirming the case for capital controls, is Handelsblatt which reports that Switzerland is preparing contingency plans in the event that the €-crisis escalates.

The government would oppose a flight to the Swiss franc. In this context, a working group is examining and negative interest rates and capital controls, the Swiss Finance Minister Eveline Widmer-Schlumpf said in Parliament yesterday. At negative interest rates of foreign assets in CHF are subject to a penalty tax.


"We are certainly prepared for possible alternatives," Widmer-Schlumpf said on questions of deputies, the government would like to respond. To capital controls or negative interest rates, she said: "These are questions which are examined in this Task Force on the franc strength."

But just like any other centrally panned intervention this one too shall fail. What is more important, is that now that the concept of a EUR end is tangible, it will likely become a self-fulfilling prophecy:

Companies switched gears from preparing for a possible exit by Greece to some sort of currency breakdown after Italian Prime Minister Silvio Berlusconi’s government collapsed and 10-year Italian bond yields rose past 7 percent in November.


“A couple of weeks ago I would never have thought about having conversations on the probability of the euro disappearing, but now there is more speculation on such a scenario,” Wolters Kluwer NV (WKL) CEO Nancy McKinstry said in a Nov. 29 interview at the company’s headquarters outside Amsterdam.


The board of Wolters Kluwer, Europe’s largest tax and legal publisher with offices in Frankfurt, Milan, London and Phoenix, has spent more time on scenario planning, she said.


“We obviously have plans in place if something happens,” ABB Ltd. (ABBN) CEO Joe Hogan said in Zurich on Dec. 1. “They can never be as robust as you’d want them to be but we certainly are prepared if there is a crisis.”


The Swiss engineering company “updated what we would do” in the past few weeks, Hogan said. “We just keep updating and making our plan more and more detailed.’


Bayerische Motoren Werke AG, the world’s largest maker of luxury cars, has honed its plans developed following the 2009 financial crisis and is prepared to act if markets dive, Chief Financial Officer Friedrich Eichiner said in November.


The Munich-based carmaker’s response would include reducing production by as much as 30 percent and using its banking unit to directly tap central bank reserves. The company also has reduced its leasing portfolio to manage risks in case used car values decline.

In other words, what is certain is that nobody has any certainty what will happen, and the result would be a massive deleveraging wave of epic proportions. What is also certain is that the global central banking cartel (sans the ECB in the post non-EUR world), would do everything to halt said deflationary vortex, and will just hit the CTRL+P combination on every possible device in its arsenal to stave off the inevitable. What is then absolutely sure, is that the second to last step will be the realization of Bernanke's theoretical threat to dump money out of helicopters... with the final outcome being history repeating itself once again, in that no civilization has ever collapsed from a deflationary collapse but always from the authoritarian response to it, yet which has seen hard assets survive in fair value form for over 20 centuries.

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Tic tock's picture mention of the illustrious dollar?

agent default's picture

Not yet.  And to be fair the Bernank is nowhere near as ridiculous as that bunch across the pond.  He is scary, but compared to the Euroclusterfuck, he is a pussy compared to the pros over there.  For now.  In any case long popcorn and overweight physical silver.  And get some gold while at it.

Chris Jusset's picture

We all know that, as a last gasp, the Central Bankers will PRINT, PRINT, PRINT ... so the only questions are (1) how much time will this buy; and (2) how much worse will this make the crisis?

SwingForce's picture

The FED will print for the UK same as they did in 1927, notice how the UK just extracted themselves from the EU? Call them England, UK, British, All the more to FOOL you with, my Dear......

h/t Griffin, TCFJI (When the BAU hatches a profile, its easy to follow. Add'l h/t Criminal Minds tv show BF).

rsi1's picture

comments of 2 CEOs of comapny nobody has ever heard of before, lol! great evidence of capital flight ZH! way to go!

whats next? crude oil will not be used any longer in a month because the CEO of TinycompanyX believes renewables will be a solution in the next month and has invested $1000 in FSLR?

Ahmeexnal's picture

Stick a fork in this porker. It's done, sliced and diced.


Switzerland already preparing for recession as soon as war breaks out in Europe following euro collapse:

Teamtc321's picture

There was a cyclical weakening in the third quarter of 2011, observe the chief economist of the State Secretariat for Economic Affairs (SECO), in an interview published Saturday by the newspaper Aargauer Zeitung . It is quite conceivable that we see two negative quarters. However, as a whole, the Swiss economy is still doing well.

Mr Lennon Hendrix's picture

Bayerische Motoren Werke AG

Manthong's picture

It would sure be nice if there was some kind of monetary asset out there that wasn't subject to all that counter party risk and uncertainty.

SilverIsKing's picture

I'm scanning the periodic table of elements in search of something that could serve as a suitable monetary asset. I'm going in numerical order and am at #46, Palladium. I feel like I'm getting close so I'll let you know if I find something soon.

Mr Lennon Hendrix's picture

if you find something, test it out by showing it to babes.  if they like it then we can probably use it as a medium of exchange.  that's how i do my science experiments.

ratso's picture

It is David Cameron who alienated the rest of the EU.

Furthermore, if corporations take precautions, it is not equivalent to predicting the outcome of the current situation. 

Also, it is far too early to say the euro ship is sinking.  My bets are that it floats into the furture - stronger that has been up until now - after the recession that will come in 2011.

SilverIsKing's picture

Taking precautions can become a self-fulfilling prophecy.

MrPalladium's picture

Thanks, but palladium will do!!

obejoyful's picture

My fear is that the government will put a 90% tax on the gain on this element when the rest of people "get it".  How do protect yourself for this situation?

NEOSERF's picture

Baked beans, spam and ammo...put your money on it...these are assets you won't regret...

Calmyourself's picture

Good point dude, who the hell ever heard of these guys, what do they make buggies or somthin..  Bayerische Motoren Werke, sounds like the last thing they made was Frankensteen's wagon, ehh..

MarketWatchTerrorist's picture

Agreed. This story is nonsense. Just an outlier, not a trend.


There is 0 chance that the 70 to 90 year old men that spent most of their lives setting up the New World Order will allow Europe, their crowning achievement, to dissolve back into petty sovereign nation states with disparate governments and cultures.  They already got most of them speaking English, just another hundred years to normalize their cultures and it's game over.


Seriously, there is 0 chance of a European Union break up.  Zero.  I just wish I knew how to trade that fact via some outrageously leveraged bet, because this one is a sure thing.

Transformer's picture

Didn't Corzine make the same bet?

nmewn's picture

He was betting it would hold together but as they say, the market can stay stupid longer than you can stay solvent.

I think he also signed off on a mandatory seatbelt law against the citizens while New Jersey govenor...then promptly got into a crash in his SUV while not wearing is full of these little ironies & cosmic

Jackfish's picture

Exactly correct

Fact Number One: Why was Corzine thrown around the inside of the vehicle? Simple - he wasn't wearing a seat belt. "It was not his habit," said a former aide, Scott Kisch, to Newsday. Kisch was Corzine's driver when he served in the U.S. Senate. "You had to tell him if you wanted him to wear it. I gave up early on."

Not wearing a seat belt happens to be a violation of New Jersey state law. It is also beyond stupid. I won't drive down my driveway to the mailbox without buckling up.

Manthong's picture

To paraphrase Ayn Rand: He chose to ignore the laws of physics and the risk of carelessness but he could not ignore their consequences.

Ahmeexnal's picture

Another fool who believes he can block the sun with his fat greasy thumb.

h3m1ngw4y's picture

everybody can block the sun with his thumb its a matter of focal point, eyes and sun

kito's picture


Calmyourself's picture

I'm the older brother and I was passed over, I'm smart,.. I'm smart and I deserve respect...

SARC.... with a touch of Young Frankensteeen, get with the program..

pkea's picture

 the chances are slim that the euro will go down.  I wouldn't make assumption that there is a zero chance though. This quarrel between the US and Eu old men( chase and some other houses in Europe) goes back a while ago. I would thoroughly enjoy some US houses bets against EZ  and on eurobonds to give them at least significant pains . The old men did put a lot on the line to make it work on both sides of the pond. Greece and spain may leave, france and germany will stick together.

rsi1's picture

i am not as sure about the zero probability, but totally agree being very low. i find it fascinating how mostly americans and brits (who have seen their currencies devalue substantially in the last 10 years against the euro despite crisis and bullshit) do not understand that it is in fact per se a much stronger currency as it is at the moment, it doesnt have big flaws and it can certainly survive very well, even with a few govs. defaulting. but most importantly, you understand very little the kind of political commitment that has been invested and is still devoted to the project. We are talking about fiat currency in any case, so problems can always be solver if it has to do with money when it is fiat money if there is political commitment.

News: its not a euro crisis! its a crisis of confidence of some european governements debt situation, things have some link but its like saying a dollar crisis because california has too much debt.. its propaganda to get the fiscal unity moving as soon as possible.

RiverRoad's picture

rsi1:  Only the little folks dare speak for the ZH knows.  From their lips to God's ears.

mrgneiss's picture

WTF Fiat is a tiny company?

So if the company is tiny the premise is invalid?

They should send these trolls to a few logic classes before turning them loose.......

Mr.Bigfoot's picture

BMW automobiles are somewhat obscure, very localized German market...

JOYFUL's picture

Yes, but in the statist definition of Big, an automaker aint big till it's been fed at the public trough long enough to grow a huge belly of taxpayer funded debt.  BMW, Fiat, small that's BIG.

Looks like a gaggle of Obummers' country cousins have logged on here tonite!

francis_sawyer's picture

gm owns fiat (controlling) cept for the ferrari & maserati brands

Dismal Scientist's picture

Do your homework. BMW sell globally, particularly in US and Asia.

philipat's picture

The ECB cannot print because it is against its charter. A Treaty change would be required and Draghi will not print without forcing the politicians to take the decisions they should be taking. The problem for Merkel is that she can't get any further bailouts (In the form of printing or whatever) through her own democratic processes.

So it's easier just to blame the Brits and continue to do nothing. Czech mate?

NEOSERF's picture

The endgame is very clear to for a series of all 17 state emergency meetings which will be the meeting that the ECB is given "emergency powers" to will want to be fully shorting the euro and buying metals as inflation will go through the roof

MarketWatchTerrorist's picture

Will need them to kill all the Mexicans with "BROWN PRIDE" tattooed across their chest liek the guy in your picture.  Did you enjoy watching him get knocked out in 60 seconds on his first title defense by a white Brazilian?


I sure did.

jeff montanye's picture

kind of like republicans vs. democrats, albeit even uglier.

keep them uneducated and fighting amongst themselves.

Imminent Crucible's picture

I foresee a frenetic game of musical bank accounts, as Spanish companies sling their euros into Germany to escape the peseta, French companies rush their euros into Belgium to avoid the Return of the Franc, Italian corporations move all their funds to France to evade the resurrected lira, and Germans fling their money across the pond into Bernanke Bucks to dodge the resuscitated Deutsche Mark.

What's clear now is that absolutely no one knows where the ax falls next.

At least the velocity of digital money should pick up, as everyone rushes helter-skelter into his neighbor's basement to avoid the Eurocollapse tornado.