Euro crisis: How a Greek euro exit could affect you
Published: 17th May 2012 00:09:31
Governor of the Bank of England, Sir Mervyn King, says that the UK will not escape unscathed from the crisis in the eurozone.
There is the "risk of a storm heading our way from the continent", the governor says.
Meanwhile, UK Prime Minister David Cameron says that now is the time for the eurozone to "make up or it is looking at a potential break-up".
In Greece, fresh elections have been called as debate rages about its financial position. European leaders say they will cut off funding for the country if it rejects the bailout agreed of March.
This would mean effective bankruptcy for Greece and a likely exit from the euro, analysts say.
So, as the euro weakens against the pound and the dollar, and Greece faces a return to the drachma, what does this mean for people in the UK?
Who is at most risk of being buffeted by the eurozone storm?
The Association of British Travel Agents (Abta) says around 5% of the 36 million holidays taken by the British abroad are to Greece and its islands.
At present, they spend in euros. If Greece left the euro, and adopted the drachma again, it is likely that visitors on holiday will see their money go much further.
That is because the process of leaving the currency will almost certainly involve a simultaneous devaluation of the new currency against the pound.
For those still wishing to pay in euros this summer, there will still be time to judge the situation.
"If Greece does default on their payments and drop out of the eurozone, this will not happen overnight," says James Hickman, managing director of currency firm Caxton FX.
"We predict that there will be a gradual shift to the drachma, so no holidaymakers or homeowners will be stranded with unusable currency. In fact your euros would be worth a lot and there would be no reason to get rid of them."
Travellers to other eurozone countries have been seeing their pound fetching more euros in recent weeks than at anytime for three years.
Mr Hickman expects that trend to continue.
"Considering that the euro will continue to depreciate - irrespective of a Greek drop-out or not - there is no need to rush out to buy your holiday cash, although we always advise you get spending money before you arrive at the airport," he says.
David Kerns, private client dealing manager at Moneycorp, says that only a big change in policy from political leaders in Europe could reverse the weakening euro value against sterling.
Uncertainty in Greece has led to huge withdrawals of funds from the country's banks.
In February, the former finance minister, Evangelos Venizelos, said Greeks had deposited 16bn euros overseas, including "32% in British banks and 10% in Swiss banks".
For those who still have deposits in Greece, any devalued new currency would see the value of these funds decrease, and high inflation would affect the spending power of these savings - but the question would be by how much.
Were banks in Greece to collapse, then European rules state that savers should have deposits of up to 100,000 euros protected, but this assumes that the Greek banking system and government can honour this commitment.
If UK savers were involved, then their might be the chance that the UK government bail out those people, as it did in 2008 with UK residents who saved with the Icelandic banks - but this is by no means guaranteed.
As of November 2011, there were 5,410 people who lived in Greece and who received a UK state pension.
They make up about a fifth of the UK expatriates living in Greece.
These pensioners, by receiving their benefit in sterling, would see their spending power rise if a devalued new currency comes in, or even just because of the falling value of the euro against the pound.
"We are seeing some people holding money in pounds, then transferring into euros when they need it," says Mark Bodega, of currency firm HiFX.
"Some are keeping money in the UK just in case."
It is a very different story for those UK citizens who have moved to live and work in Greece and face the same uncertainties and austerity as everyone else in the country.
In a relatively small survey by HiFX, more UK citizens that had homes in Greece wanted to sell up that those with property in any other country.
Any exit from the euro is likely to see the value of this property fall.
Many UK people who own homes in Greece may live there during holidays and then rent them out during the rest of the year.
They face a decision on whether to keep charging this rent in euros if Greece readopts the drachma.
If they charge euros, then this would be expensive by local standards and they might struggle to find tenants. But, if they charged drachmas, then they might find this earns them very little if they convert it back into sterling or euros.
There are some 34,000 people living in the UK who were born in Greece, according to the Office for National Statistics.
Their financial situation depends on where their wealth is held.
For those who have assets in Greece, any euro exit could have a big effect. A new currency could be devalued by 40% to 50%, according to Mr Kerns, of Moneycorp.
However, those who own businesses or homes in the UK and sold up would be able to buy a lot more in Greece than at present.
At 03:16:30 in HeadlinesUkraine says it will launch an investigation into a fatal shooting in the east of the country which has raised tension with Russia further.
At 02:46:49 in HeadlinesFresh violence has erupted in the Venezuelan capital, Caracas, between police and opponents of President Nicolas Maduro.
At 02:43:14 in EnglandA "very English and very eccentric" tradition that dates back centuries is expected to attract thousands of people on Easter Monday.
At 02:41:42 in HeadlinesOnline social media is being misused to insult, intimidate and smear staff in schools, the conference of the NASUWT teachers' union will hear.
At 02:33:53 in BusinessJapan's trade deficit quadrupled in March as export growth slowed and energy imports continued to rise.
At 02:26:33 in HeadlinesTeachers are to debate calls for a boycott of tests for four-year-old pupils, set to be introduced in England's primary schools in 2016.
At 01:21:56 in EnglandFlood protection has been restored to more than 100,000 properties in England left at risk after the wettest winter on record.
At 01:21:22 in EnglandAs part of a BBC Radio 3 series marking the 450th anniversary of Shakespeare's birth five essayists are shedding light on the history and culture of the Midlands. In the first essay, novelist and journalist Geoff Dyer tries to work out what is the true home of the Midlander.
At 01:03:38 in HealthThe incidence of the most serious skin cancer in Great Britain is now five times higher than it was in the 1970s, figures show.
At 00:57:50 in HeadlinesAs you enjoy another bank holiday, are you thinking "why don't we have more of them", asks Anthony Reuben.
Harvard CitationBBC News, 2012. Euro crisis: How a Greek euro exit could affect you [Online] (Updated 17th May 2012)
Available at: http://www.ukwirednews.com/news/1429089/Euro-crisis-How-a-Greek-euro-exit-could-affect-you [Accessed 21st Apr 2014]
News In Other Categories
A motorcyclist who was seriously injured when his machine collided with a 4x4 towing a trailer carrying an inflatable boat has died, said police.
David Cameron could cause "alienation" with his comments about Christianity in the UK, public figures have warned.
Luke Donald finished second at the RBC Heritage as Matt Kuchar's final-round 64 earned victory in South Carolina.
Scotland's first chocolate factory aroused suspicion at the outbreak of World War One. Why was it so strongly-built and why did it employ so many Germans? The authorities were called to investigate.
Japan's trade deficit quadrupled in March as export growth slowed and energy imports continued to rise.
A "very English and very eccentric" tradition that dates back centuries is expected to attract thousands of people on Easter Monday.