Business World

Monday 19 March 2018

What it will mean for you if Greece finally leaves the euro

Greek conservative party leader Antonis Samaras leaves the presidential palace after a meeting in Athens. Photo: Reuters
Greek conservative party leader Antonis Samaras leaves the presidential palace after a meeting in Athens. Photo: Reuters
Laura Noonan

Laura Noonan

Just what would it actually mean for us if Greece does leave the euro? What would it mean for citizens, for taxpayers, for businesses? What would it mean for people with savings, and for those in debt?

If Greece left the eurozone, Ireland would be right back in the firing line. The quick-to-judge markets could easily deduce that if Greece had managed to leave, other bailout countries, including Ireland, could leave too.

Then, the interest rate demanded by investors holding government debt would soar again to well over the 10pc that once horrified us. This could make it impossible for Ireland to hit next year's target of raising money on the markets and exiting the bailout programme. So we could end up with another bailout.

The uncertainty could also make it far harder to tempt companies to invest in Ireland -- making the Government's task of selling €3bn of State assets a much harder ask. Half the money from those sales is earmarked for "job creation". No state asset sales equals no €1.5bn job-creation budget.

Ditto for the State's plans to sell off Irish Life for €1bn or so. The first attempt at that sale was scuppered last November when Great West LifeCo got cold feet and blamed the eurozone crisis. Those feet would be positively freezing if a country departed the eurozone, and we'd be left holding Irish Life for years and years when we'd much rather be holding the cash.

Our banks would be back in the eye of the storm, too, and we'd need a massive show of support from the ECB to avoid a catastrophic run on deposits from investors and savers.

It's not that investors hate the punt, it's that they don't know how much it would be worth. If savers have €10,000, we could 'convert' it to £10,000, but the markets might decide £10,000 is only worth €5,000. Suddenly, half your money is gone.

Extraordinary support from the ECB could get Ireland's banks through a period of depositlessness, but if the ECB didn't step in, the taxpayer might have to give even more guarantees or support.

Then there's the collapse in the euro that would inevitably be triggered by the exit of Greece, at least in the short term. That would be good for Ireland on one hand -- companies exporting to non-euro countries would have 'cheaper' goods to sell.

Companies and consumers buying goods from anywhere that doesn't use the euro would have the opposite experience -- everything would get more expensive, consumers would be able to buy less and importing companies would employ fewer people, earn less and pay less tax.

Irish people have been scared witless by the crisis, so scared that they stopped buying houses for about three years. Activity is only just starting to recover but it wouldn't take much to send the market hurtling downward again.

And all this doesn't take into consideration the great imponderable consequences that no one can accurately foresee but that can always potentially occur with something as seismic as the first stage of a eurozone break-up.

Irish Independent

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