The Euro (EUR) exchange rate is forecast to decline further next week as the climax of the five year long Greek crisis draws nearer. Politicians across the single currency bloc are continuing the desperate fight to reach a deal but the chance of an agreement being reached appears to be a forlorn hope.
The Euro to Pound Sterling Exchange Rate Reached a Session Low Of 0.7124
Economists and European leaders have persistently said that the Eurozone can weather out a Greek exit; other analysts however believe that attitude is naive. Whatever happens there will be massive repercussions for the currency bloc. If Greece leaves, the currencies much vaunted invulnerability will be lost and the regions reputation will be in tatters, after all if one member can leave, then what is to stop others?
Contagion will spread and negatively affect the global markets despite what the politicians and economists say, at least for a time. If Greece’s creditors buckle and grant the bailout terms in order to prevent a Grexit then there will also be consequences. Other Eurozone members hit hard by austerity measures (such as Portugal) will demand that their situations be reassessed as they will argue that it is unfair that Greece gets a reprieve and they do not.
Could Greece Turn To Russia? Euro (EUR) Exchange Rate Likely to Remain Vulnerable
Greek Prime Minister Alexis Tsipras surprised the markets today by launching an attack on the EU’s fixation with austerity measures. Tellingly he made the comments whilst in Russia.
‘As all of you are aware, we are at the moment at the centre of a storm of a whirlpool, but we live near the sea so we’re not scared of the sea. We are ready to go to new seas to reach new safe ports. The problem we are facing is deeply rooted in the process I have described. The Eu should pursue its own path. The EU should go back to its initial principles of solidarity and social justice. Ensuring strict economic measures will lead us nowhere. The so-called problem of Greece is the problem of the whole European Union,’ Tsipras said in a speech in St Petersburg.
If Greece turns to Russia for assistance or just forms closer ties it will set alarm bells ringing across the continent. The nightmare scenario for NATO and the EU would be if Greece allows Russia to build naval bases on its soil in exchange for bailout funds. Such a move would be of grave concern as it would allow the Russian navy free access to the Mediterranean.
Several governments have warned tourists heading to Greece to take plenty of money with them due to fears that the country’s cash machines could be shut down in a bid to prevent a cash-run if the negotiations fail.
‘Looking back to the last time that things reached a head in Greece in 2013, the short term impact was a lack of availability of cash at ATMs and a reluctance by shops and restaurants to accept credit or debit cards. With that in mind, we are advising customers travelling to Greece in the coming weeks to be prepared and ensure they budget carefully, taking enough cash in Euros to see them through their holiday,’ said an economist.
Will Brexit be the next crisis? Pound Sterling to Euro (GBP/EUR) Exchange Rate Fluctuations Predicted
Even if the Greece crisis is resolved in a positive manner the crises for the Eurozone and the wider European Union will continue as attention will then turn to British EU referendum. Plans for the vote may still be in the early stages but the fear of the implications of Brexit is likely to weigh upon the Euro to Pound exchange rate until the result of the vote is known.
A Grexit would be bad news for the EU, but a Brexit would be far worse. The British economy is a lot, lot bigger than Greece’s; the country is one of the world’s largest economies and is the fifth largest military power on the power. To lose such a member would be a big blow.
Whether the Eurozone and EU can ride out these challenges remains to be seen, but one thing is certain; the fall of either will have serious and far reaching consequences for the world at large.