May 28, 2023

Euro Watch: Central Bank Chief Says He’s Set to Step in After Greek Vote

“The Eurosystem will continue to supply liquidity to solvent banks where needed,” Mario Draghi told a group of economists in Frankfurt.

His remarks were a reminder that European officials are increasingly intent on putting in place long-term structures that would make emergencies like Greece and Spain less likely to occur in the future.

Central banks in non-euro countries are also making contingency plans and reinforcing their defenses against spillover from the crisis in currency zone.

In Tokyo, the Bank of Japan governor, Masaaki Shirakawa, said the central bank was “prepared to take all possible measures to ensure the financial system does not come under threat,” calling the European debt crisis “the biggest risk factor we are paying attention to.”

“Whether or not we can maintain the stability of financial markets is critical,” Mr. Shirakawa said. “There is no silver bullet, but if concerns arise about liquidity, we are prepared to inject that liquidity.”

The British government and central bank announced plans Thursday for emergency measures to help increase lending to businesses hurt by the contraction of the credit market. George Osborne, the chancellor of the Exchequer, saying: “We are not powerless in the face of the euro zone debt storm,” he said.

In Bern, the Swiss central bank said it was prepared to spend unlimited amounts of money to hold down the value of the Swiss franc if the euro came under further pressure.

European leaders will hold a video conference call Friday to discuss the global economy and the crisis in the euro region in preparation for the Group of 20 meeting that starts Monday in Los Cabos, Mexico, a spokesman for the British government said.

Mr. Draghi also said Friday that a plan to remake the euro zone, which he is drawing up along with Herman van Rompuy, president of the European Council, and José Manuel Barroso, president of the European Commission, would be made public “in a matter of days” so that it can be considered by European leaders at a summit at the end of the month.

Mr. Draghi did not provide details. But based on public statements he and Mr. Barroso have made, it is likely that a central feature of the plan will be a so-called banking union in which euro zone countries would form a common insurance fund for bank deposits, to prevent bank runs.

The plan would also propose establishing a more powerful common regulator for the biggest banks, which are currently supervised primarily at the national level. It is possible that the E.C.B. would serve as that supervisor. And euro zone nations would establish a fund to close down terminally ill banks, to minimize the cost to taxpayers.

The plan is also likely to reflect Mr. Draghi’s call Friday for countries to take steps to designed to improve economic growth. They should dismantle regulations that make it difficult for companies to hire and fire workers, and remove bureaucratic procedures that make it difficult to start businesses. He also called for countries to get rid of regulations that protect businesses from competition or make it difficult for small businesses to offer services across borders.

A person familiar with the discussions among policymakers, but not authorized to speak publicly, said some of the measures could be adopted at a European Union summit at the end of the month, while leaders would agree on a timetable to implement the rest.

Although it would take some time to implement such a plan, Mr. Draghi said the existence of a credible roadmap would reassure investors and European citizens.

“Markets and people need to be reassured we are still traveling together,” he said.

The euro crisis headlines have been dominated this week by the market’s apparent rejection of Spain’s $125 billion banking sector bailout, but Greece’s moment of truth has been looming.

Greeks return to the polls on Sunday after a May election failed to produce a workable coalition. The country’s fractured political map could again produce a struggle among parties led by the conservative New Democracy, the anti-bailout Syriza and socialist Pasok to muster sufficient allies to form a majority in Parliament.

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G.M. Pieces Together a Japanese Supply Chain

Toyota, which gets up to 15 percent of the parts used in its North American plants from Japan, is experiencing shortages of 150 critical parts. The company is operating at about 30 percent of normal capacity in the United States, with full operations not expected before November or December.

But American automakers are mostly winding down their disaster response operations — and though some supply problems remain, they are taking stock of a crisis averted. Analysts said the near-term outlook remained bleak for the Japanese automakers, while their rivals in Detroit, Korea and Europe are past the most difficult period.

The largest American automaker, General Motors, which spends about 2 percent of its parts-buying budget in Japan, identified 118 products that it needed to monitor for shortages but has resolved problems with all but five. The company’s chief executive, Daniel F. Akerson, predicted last week that the Japanese disruptions would have no material impact on G.M.’s earnings.

That is a big change from the early weeks after the March 11 disaster, a period Mr. Akerson described as “white-knuckle time” when numerous plants came close to halting work and just one of the potential supply problems could have prevented G.M. from building 75,000 vehicles.

“It was pretty tense,” he recalled in an interview.

Though G.M. obtains considerably fewer parts from companies in troubled areas than its Japanese competitors, its handling of the problems, as recounted by executives and employees involved in the effort, reveals how closely Detroit teetered toward disaster.

Four days after the earthquake, G.M. had assembled hundreds of employees into a team that began working around the clock to manage what has turned out to be the biggest catastrophe to hit the auto industry’s complex supply chain. G.M. regularly creates contingency plans for supply disruptions, “but nothing on this kind of scale or scope,” Stephen J. Girsky, a G.M. vice chairman, said. Through what it called “Project J,” General Motors briefly idled two plants to conserve supplies but otherwise found alternative sources for some parts and helped many suppliers get back online quickly enough to keep car and truck assembly lines running. The outstanding problems are essentially limited to semiconductors and other electronics. Because these devices are widely used in vehicles and substitution options are generally limited, G.M. executives said they were not entirely in the clear.

“We still have issues,” said Robert E. Socia, G.M.’s vice president for global purchasing and supply chain, “and the issues we have now are getting tougher to solve.”

General Motors has coordinated its disaster response from three “crisis rooms” at its Vehicle Engineering Center in Warren, Mich. Early on, dozens of people crowded into two windowless, seventh-floor conference rooms — one of which is devoted solely to monitoring the many critical electronic components that G.M. buys from Japan — while engineers filled a room in the basement.

Maps and dry-erase boards on the walls track the status of each affected supplier, the parts G.M. buys from them and the plants that need those parts to stay open. Using a color code, suppliers out of commission were labeled in red. Any that were unscathed but lacked reliable power and water supplies were labeled in yellow. The goal was to turn them all green.

The team, which requested and quickly received portable air-conditioners to fight the heat created by working long days in close quarters, ultimately identified the 118 problematic items, Bill Hurles, the executive director of G.M.’s global supply chain, said. Issues with 33 of the products did not become known until early April, mostly because they involved disruptions at sub-suppliers that G.M. rarely interacted with directly.

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