Banks Build Contingency for Breakup of the Euro
The main danger of a euro breakup, said Stephen Jen, managing partner at SLJ Macro Partners in London, is “redenomination risk,” the unpredictable effect that a euro breakup would have on financial assets as newly created currencies sought their own levels in the market and the value of contracts drawn up in euros came into question.
Most people hope that will not happen. “Remember when Lehman went bankrupt — nobody could anticipate what happened next,” said the French banker who was not authorized to speak publicly. “That was a company, not a country. If a country leaves the euro — multiply the Lehman effect by 10,” he said.
Boldfaced emphasis added by me.
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