Comment by Carl Hasty, Director of SmartCurrencyBusiness.com:
There are myriad disadvantages of a potential ‘Grexit’ (the case of Greece defaulting on its debts and leaving the Eurozone) to both Greece and the multi-nation bloc. UK Prime Minister David Cameron has described this potential event as a ‘serious economic risk’.
But what of the repercussions for UK businesses?
- The Grexit would aggravate investor confidence in the Eurozone, of which the UK is a member. This would lower demand and decrease investment.
- It would threaten UK exports, given that the Eurozone is the UK’s largest market.
- As Greece struggles with its repayments, currency markets are fluctuating with associated uncertainty. A Grexit is likely to weaken the euro. Even if a Grexit becomes inevitable and the event is factored into currency markets, the effects of such an event would cause economic challenges that would weaken the currency.
- UK businesses would forfeit their privileges when it comes to trading with Greece. Eurozone regulations that lower barriers to entry and ease regulatory red tape would cease to apply to UK businesses trading with Greece.
- If Greece were to default on its debt, this could be mirrored on a smaller scale, with UK creditors to Greece losing out on unpaid debt.
The circumstances surrounding a potential Grexit differ from the motivation behind a potential Brexit. Should Greece leaving the Eurozone come to pass, the fallout will give a partial indication of what to expect in the case of the UK leaving the EU. What is certain is that either case will involve increased risk for UK businesses.
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