Author: Michelle Perkins - Categories: Procurement Intelligence
Maybe it's time that the phrase 'beware of Greeks bearing gifts' was changed, because after a week where the country's financial state looks more perilous than ever, maybe 'beware of Greeks carrying a huge fiscal deficit' would be more apt.
Joking aside – and there is certainly little humour reverberating around the corridors of power in Brussels at the current time – Greece's immediate position poses some very awkward questions, both in the country itself, the eurozone in general, and also those procurement operations that are heavily exposed to the kind of wild currency fluctuations that we've witnessed since the turn of the year.
EU leaders have gathered today for an economic summit where, for the first time in the ten-year history of the single currency, serious doubts will be raised over the eurozone's ability to cope with a crisis of this magnitude. There have already been talks of a split, with Swedish Finance Minister Anders Borg claiming that the International Monetary Fund (IMF), rather than the 16 members of the eurozone, is best placed to offer Greece the financial assistance it needs to climb off its feet, dust itself down and start again.
The problem goes far beyond Greek borders, however. "The crisis, running along Europe's southern rim to its western edge, is the European Union's coming of age,” writes Bronwen Maddox in yesterday's Times.
And she's right. When the euro was introduced, many in Europe saw it as the answer to all the continent's economic problems. By introducing the euro in some of Europe's smaller nations, their economic performance, Brussels argued, would be brought up to the same levels of the continental powerhouses of France and Germany. During the boom times – remember them? – this could probably have said to have been the case. Now, with Greece teetering on the brink, and Portugal, Ireland, Spain and possibly Italy not far behind, that plan appears to be unravelling fast.
On a far more basic level, the euro has continued its slide against the dollar and the continuing uncertainty over the currency's long-term health (or even viability) is leaving procurement operations desperately scrabbling around for answers to some very uncomfortable questions.
Procurement thrives on certainty - certainty of supply and, equally crucially, certainty of price. However, with the yo-yoing of the euro, dollar and pound, the price of many goods is likely to be changing on a daily basis. And for those firms that do not have the cushion of a coherent hedging strategy to mitigate against such violent currency shifts or a relationship with suppliers which shares the burden of any such changes, the impact can be devastating.
Another major problem is that the euro has been so stable for so long, that many in procurement are now being thrust into a situation that they have neither the experience or, in such volatile times, the confidence to deal with.
And while devising a strategy to cope with currency fluctuation is hard enough, working through the machinations of European fiscal policy is something completely different.