Belfast Telegraph

Tuesday 29 July 2014

Greek crisis spells more trouble for exporters

Greece's conservative leader of New Democracy Antonis Samaras needs to form a coalition government

The standoff by political parties in Greece has made life more difficult for Northern Ireland's exporters by forcing down the value of the euro yet further.

The price of a euro has dropped below 80 pence for the first time since November 2008 and foreign exchange traders said further falls are likely given the break of this "psychologically important" level.

A weaker euro means companies which export goods and services to Europe need to drop their prices in order to compete in indigenous markets, including when exporting across the border in to the Republic.

Prompting the slide is the failure by Greece's political parties to reach agreement on forming a coalition government. The Radical Left Coalition party, known as Syriza, has announced it would refuse to join a coalition government in the troubled country. It disagrees with the austerity measures put in place by the Greek government to try and pay back its mounting debt.

The political impasse in Greece has spooked stock markets and, aside from pushing the euro down, it has forced the main Greek index some 7% lower, the FTSE 100 down 2% and the Dow Jones Industrial Average over 1% lower.

Professor Mike Smyth, Head of the School of Economics at the University of Ulster, said the euro would have fallen "through the floor" were it not for the strength of the German economy, one which contributes around 30% of the single currency's value.

He didn't feel the drop in the euro's value would impact Northern Ireland's exporters significantly in the short term, rather it is the downturn in the European economy which is a worry.

"If it (the drop in the value of the euro) persists for a year or two and in the meantime our export markets recover then i would start to get more concerned," he said.

"A strong or weak exchange rate is not a concern to our exporters at the moment. What is a worry is the question of whether there is anyone out there who needs our stuff."

Aside from exporters, the euro weakness can also hit the tourism market by making a visit to Northern Ireland, or indeed the rest of the UK, more expensive for visitors from Europe.

On the upside, it's less expensive for tourists from Northern Ireland when holidaying in Europe.

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