As one of our Business Club Members, AFEX bring over 30 years’ experience within the foreign exchange market. They specialise in tailoring a bespoke variety of risk management and treasury solutions to their 24,000 clients globally when faced with a deliverable FX requirement.
We sat down with Trevor Charsley, a Senior Advisor at AFEX, who has over 20 years’ experience within the FX market to hear his thoughts on Greece and its current economic situation.
Trevor, what are you telling your clients about Greece and the state of the Euro at the moment?
Well, the Euro has lost some 12% in value against the Pound since the start of the year. One of the reasons for this, are the Greek debt renegotiations which have faltered now leaving Greece with capital controls and maximum daily cash withdrawals of 60 Euro’s; we also hear it’s difficult to use credit cards out there.
What does this mean for holiday goer’s traveling to Greece?
If you’re holidaying in Greece make sure you have enough cash to cover emergencies, unforeseen circumstances and unexpected delays (in case you are stuck at the airport) in small denominated notes. Do take your credit card and your prepaid currency card as they may be accepted but just be prepared to pay for everything with cash.
How have Greece got to where they are?
Greece joined the EU in 1981 and adopted the Euro in 2001. In 1992 the Maastricht treaty, which led to the creation of the Euro, stated that no country should have a budget deficit (i.e. overdraft) of greater than 3% of Gross Domestic Product (how much money it makes annually).
At that time Greece was already breaking this rule, for example, the State run railway was losing 1bn Euros a year and had more employees than passengers. A former Minister, Stefanos Manos, even said at the time that it would be cheaper to send everyone by taxi rather than using the train.
Through sleight of hand they managed to pass the Masstricht treaty, as it appeared that they were operating within a 1.5% deficit when in fact it was at 8.5%. To put that into context, the UK was running at a deficit of 7.5% in 2011 during the height of the financial crisis, which was viewed as the most pressing issue to resolve by the UK Government.
The world financial crisis also caused Greece financial issues and in May 2010 they received an 110bn Euro bailout from the IMF, ECB and the Eurozone in return for promises of economic reforms. Alas things didn’t improve and Greece got an even bigger bailout in March 2012, this time for 130bn Euro’s. By 2014 Greece was spending 10% of its money on running the state, 20% on bailing out its banks and a whopping 70% on paying interest, paying off debt and also rolling the debt over.
What is being done to resolve the situation?
Following the disappointment that newly elected anti-austerity party Syriza faced, after failing to have Greek debt written off by the Eurozone creditors, the Syriza government have since been in negotiations for the last 5 months with the creditors on how to fund Greece.
The left wing Greek government are stern in their negotiations and are adamant that there should not be any more cuts to pensions or labour law reforms. A Greek pension is 20% larger than the current German state pension with the average person within a “hardship profession