A GREEK TRADEGY FOR US ALL

Greece- Saying Goodbye to the Euro?

As the Greek situation worsens it is important not to forget the human implications for Greece's population; increasing poverty,social breakdown,unemployment, a deteriorating health service and an abandoned generation. The Germans see it very differently of course, a profligate nation that tricked its  way into the Euro by fiddling the figures on the level of its public sector deficit. According to the Spectator, the cost of employing Greeks increased by 40% in the first 8 years of the Euro. If Greece was not in the Euro they could have devalued -- making their exports more competitive but their imports dearer. A default on their external debt would produce a very similar monetary outcome but with added complications. State Spending in Greece increased by nearly 90% over the last decade nearly 5 times faster than in Germany. Unemployment is nearly at 22% of the working population, GDP  year on year is falling at 7.1% and the interest rate on it's 10 year government bonds is a whopping 28.41% -- will there be any takers even at that eye watering rate of interest?

If Greece pulls out of the single currency then any substitute currency (New Drachma?) will be worth much less than the previous euro in terms of the exchange rate. Greeks could see the value of their savings,currently in euros halved or even worse in terms of the existing euro purchasing power. Many richer Greeks will be taking their money out of the country and investing it elsewhere (in the London property market?). What about trade and foreign investment in Greece? If a government, private bank or individual has lent money to Greece or invested in the Greek economy will they wish to withdraw their cash, or as much of it as they can now? Or will they wish to see their investments\loans converted into new Drachma? I hardly think that holding new Drachma's will be an attractive proposition for many people. How will these issues affect the balance sheet of UK PLC limited? In terms of trade with Greece, will that be also affected?

The UK will need to be cautious about how the Greek crisis might affect its own economic position and it will need to be careful to minimise any potential cross contamination effects of the Greek crisis on the UK economy. This will be as important for the UK public sector as it will be for the UK private sector ? It will need to mitigate these risks as best it can.