By Kiri McEniff
You have probably heard a lot about the debt crisis in Greece in recent months – the nation took a referendum to decide if the country would continue to comply with the austerity terms of their international creditors, and despite a majority ‘no’ vote the nation’s parliament continued to negotiate with the euro-group on a bail-out deal.
In brief, Greece suffered greatly in the European recession, owing billions in debt to private banks. The country was bailed out by Troika, receiving €110 billion in 2010 and a further €130 billion in 2011 from The ECC, ECB and IMF. The Greece government had to impose strict austerity measures as part of the deal, and by 2013 the economy had begun to improve.
In 2014 another recession occurred and as a result a snap election took place in January 2015, which seen the radical left wing party Syriza from a government. They campaigned for an anti-austerity platform and rejected the bail-out deal. Greece missed a crucial IMF repayment of €1.5 billion (£1.1 billion) and conducted a referendum to decide whether the people of Greece would comply with the austerity terms of their international creditors. Up to this point the euro remained considerably immune to the Greece crisis, however when the news broke that they rejected the austerity deal by 61% the euro plummeted.
Despite the referendum rejecting the reform, the nation’s parliament continued to debate the austerity measures put forward by the creditors, which naturally enough caused the public to take to the streets to express their anger over the demands being made. As rioters marched on the Greek parliament the Pound Sterling to Euro (GBP/EUR) exchange rate neared the 1.43 level.
This Pound Sterling to Euro (GBP/EUR) exchange rate is the strongest it has been in seven and a half years. This strong rate is not only attributed to the Greek debt saga, but also to the news that UK wages are exceeding inflation and the underlying strength of the UK economy.
The strong GBP to euro exchange rate is good news for Northern Ireland holiday-makers planning European holidays as they will enjoy better deals. However, the rate has an adverse effect on Northern Ireland tourism as the expensive pound makes it difficult to entice tourists to the northern side of the border.
As you are probably aware, the pound to euro exchange rate heavily impacts businesses in Northern Ireland, especially given that Northern Ireland shares a land border with the Republic. The Northern Ireland tourism industry and Northern Ireland’s exporters are the most affected by the strong pound to euro exchange rate.
The Eurozone and the Republic of Ireland are a major market for Northern Ireland’s exporters, and the increasing exchange rate is a big challenge for them, as the cost of goods produced here will become more expensive for European buyers. This is especially true for exporters in the food and drink market.
If the Eurozone and fluctuating exchange rates impacts your business and how you plan for the future, why not contact us here at Ross Boyd Ltd (info@rossboyd.co.uk or on 02895 320155) to see how we can work with you to help protect and future proof your profits.