Greek economic output is shrinking at a rate hitherto unseen in post-war Europe. In fact, GDP growth stands at a miserable minus 6%, making Greece’s the fastest contracting economy in the world bar one. The tiny Caribbean island of Anguilla, which suffers notoriously from hurricanes, is the only global territory in a worse condition. Greece, meanwhile, is beleaguered by fiscal and social hurricanes of its own. Unemployment currently stands at 21.7% and for those who believe the statistics belie the situation on the ground, anecdotal evidence paints an equally bleak picture. While the queues for food in Athens are hardly reminiscent of war torn Darfur, they do evoke images of the depression-era soup kitchens and soviet bread lines. The situation appears helpless.
In the weeks and months after the national elections of June 17th Greece will stare down decisions of momentous importance; decisions that will impact upon and be impacted by – in equal measure – the rest of the Eurozone. These decisions will test the commitment of the Eurozone countries to this great continental experiment and the most important will undoubtedly be whether Greece is to remain within the Eurozone. Indecision has dogged Greece since the beginning of this crisis, creating the climate of uncertainty in which a prosperous Eurozone economy’s government bonds were quite literally downgraded to ‘junk’.
Once this uncertainty is overcome Greece can begin to rebuild. Herein lies the opportunity of this crisis, not just for Greece but for business globally. Should Greece choose to shun the Euro in favor of the Drachma (the Grexit as it is colloquially known), the Greek economy will, for a short time, be vastly more competitive, Greek exports will be inexpensive and opportunities for tourism investment (in a country where the ‘big four’ tour operators are UK owned), will be enticing in such an affordable location.
The downside, however, would be the creation of a banking crisis of greater proportions than anything we’ve seen to date. This would lead to rampant inflation, and a contagion that would spread through the Eurozone and the rest of the world.
The other option is far more challenging; it requires a period of stringent austerity. In short, it requires Greece to face the music, and this is something the British business community will identify with strongly. Wolfestone’s client base includes companies of all sizes who’ve faced recent economic challenges with pragmatism, tenacity and good judgment. The Greek business community, the Greek government and the Greek people have the talent and the fortitude to do the same, and we wish them well.
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