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Greece is the Word - What Businesses should do to anticipate EU Shocks - by Stephen Archer

 

I am of the view that long term solutions must now prevail and to this end Greek exit from the Eurozone is in everyone's interest. Yes, the pain will be enormous to start with but after 3-5 years Greece will stabilise and above all be its own master and be able to manage its own economic destiny which within the zone it cannot do – any more than any other eurozone country can with hands fiscally tied very firmly. The fiscal pact of last December will only go to make matters worse. Poor countries will stay poor just as southern Italy has stayed poor since its joining with northern Italy 150 years ago. Note the lesson.

Increasingly the acceptance of Greek exit is growing and I can envisage this becoming a tidle wave with a self fulfilling prophesy outcome. Runs on the Greek banks are bad enough but a run on the Euro and other Euro banks will be a deciding factor. So if you hold some Euros perhaps you should consider this..

In the UK, businesses should be looking at their currency exposure and balance of export markets. Over exposure to Europe poses a higher risk now so seek to balance revenues by expanding in other markets where possible. Or setting up factoring in some EU markets to reduce risk even though this may erode revenue somewhat.

Do seek to trade with countries in Europe but outside the Eurozone more. Buying from the Eurozone is more secure but don't forward buy currency so much now – the Euro is likely to slide to 1.30 to the £ before to long.

A final thought on Greece, if it exists within a year (very possible in my view) then an exit mechanism will be in place that so far is nonexistent. Some other countries may opt out as a result. This may even include Spain but Ireland and Portugal must be candidates. Economics may be the pressure but politics as in Greece is the driver. If three states leave then a total break up would not be out of the question – though rather less likely.

Meanwhile the US debt has climbed to $16.4 trillion having been allowed to rise above $14.3 trillion only 9 months ago. The rate of debt growth in the US is alarming. Interesting to note that US debt is at 102% of GDP whilst Spain's sovereign debt is just 65%, that's 20% less than Germany. Yup, as ever sentiment drives the numbers – so stay dispassionate.