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Insight & Opinion

What does the Greek financial situation mean for the UK?

Author: Staff





The Greek financial situation is a perilous one at the moment, as it has been for a number of years. Despite various measures designed to help it recover, the eurozone crisis hit the nation hard, along with the likes of Spain and Italy, and it has yet to really bounce back.

Next week (July 5th), the Greek people will go to the polls as they vote on a referendum on whether or not to accept the austerity measures presented. A no vote on the austerity plan would, in all likelihood, mean Greece’s eventual exit from the single currency. But what would this mean for the UK, and in particular the property market here?

There are two schools of thought on the matter, but the good news appears to be that the nation should be largely unaffected relative to the likes of France and Germany. This is because the UK has a low stake in the finances of Greece.

Dr Matthew Partridge, writing for Money Week, said that the exposure to Greek finances the UK has has fallen dramatically in recent times. In 2008, British banks’ and pensions funds’ exposure to Greece was £12.4bn. By the start of 2015, this had fallen to £8 billion, and it now sits even lower after a dramatic fall to £2 billion.

The UK’s largest issue would come from the fact it has a stake in the International Monetary Fund (IMF), to which Greece owes some €32 billion. However, the fact that the UK has just a 4.5 per cent stake in the IMF means that it won’t be as badly affected by that outcome as both Germany and France, the biggest debtors with €56 billion and €42 billion respectively.

Another potential problem that could emerge would be the fact that Greece’s failing economy may be seen as an indicator of what could happen elsewhere. Countries like Spain and Italy were not hit as hard by the eurozone problems as Greece, but large scale unemployment, failing housing markets and economic problems did occur. In theory, it could potentially lead to investors dumping all forms of sovereign debt, which would have the potential for damaging the UK as it has larger exposure to these nations.

However, overall the outlook will be bright for the UK, especially given how it performed around the time of the last economic downturn. Regardless of what happens anywhere else, should Greece vote no (and polls suggest the no vote will be anywhere between 47 and 53 per cent), the UK could be seen as a safe haven for investment.

When European markets last saw a fall in the price of property for example, investors were flocking into London in order to take advantage of its resilience against adversity. Should the same happen now, the country has a far more robust market as a whole, and this could even attract even more investment.

Overall, it means it’s highly unlikely that the financial situation in Greece would have too much of a negative impact on a British property market that is standing strong on its own at the current time.

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