Greece’s fragile economy expected to take another hit, this time from British vote to leave EU

25 June 2016
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Sources from the Bank of Greece assured Friday that the country would only suffer a small impact from the United Kingdom’s departure from the European Union thanks to Greece’s financial system being “shielded” by its capital controls, but this blessing in disguise will not protect Greek tourism and exports from suffering a major blow from the referendum result.

Greek exporting companies are now dominated by uncertainty, as Britain is one of Greece’s most important trade partners and the “Leave” vote has come at a time when Greek exports to the UK are showing a rising course and new Greek companies have found fertile ground for growth in the British market.

The first negative consequence for Greek products is that they will see their competitiveness reduced, becoming more expensive for UK consumers due to the drop in the value of the pound against the euro, which may sharpen in the next few days. The other concern about bilateral trade stems from the possibility of levies being introduced, both on imports from the UK and on Greek exports to Britain. Still, export company representatives consider a special trade relationship between the EU and the UK similar to that between the EU and Norway more likely.

Panhellenic Exporters Association data say Greek-British trade amounts to 2.27 billion euros per annum, of which Greek exports account for 1.07 billion euros.

Tourism is also bracing for a hit from the Brexit vote. The United Kingdom is the second biggest market for Greece, with 2.4 million visitors in 2015 who spent 2 billion euros. The drop in the pound’s value will mean less spending this year and fewer visitors from 2017, tourism professionals fear.

The question now is what will happen if Greek hotel enterprises are hit with a wave of cancellations, says Andreas Andreadis, the head of the Association of Hellenic Tourism Enterprises (SETE).

The Greek credit sector could face problems too, given that it has assets adding up to some 42 billion euros in the British banking system in terms of investments, deposits and bonds.

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