The decision made by the Greek people on Sunday whether to reject the austerity proposals suggested by Europe or to accept them was always going to be a crucial one. On the ‘No’ side was the prime minister, Alexis Tsipras, and his finance minister, Yanis Varoufakis, who had declared that the EU’s proposals were ‘terrorism’. On the other side, a number of leading Greek intellectuals and a good proportion of the population. The debate had become about national pride, with the ‘No’ camp insisting that this wasn’t a vote to get out of Europe, but a vote to stand up for the pride of Greece. Ultimately, the Greek people favoured the ‘No’ vote with 61.3% of those asked siding with the anti-austerity vote.
It leaves Greece in a curious position; in active negotiations with the Eurozone for better credit terms whilst their banks run out of money and the people are forced to make do with severely limited funds from cash machines. As we speak, Greece are around the table with other Eurozone leaders and following the sacking of Mr Varoufakis, there’s even a new, less hard line minister in the form of Euclid Tsakaotos, a British educated intellectual and Leeds United fan. Clearly, there is a long, tough road ahead. The Greek economy is far less advanced than its European cousins and it’ll have to either expand greatly or impose tough austerity measures in order to pay back the £234 billion it owes.
With all of this gloom, it’s important to consider where the UK stands to lose out should the Greek economy completely collapse. The news, whilst potentially devastating to the 11 million people of Greece, doesn’t pose a huge threat to the UK in the imminent sense. Although 60% of the money Greece owes is to other European nations, the UK is only owed £1 billion, which is pale in comparison to the £40 billion Germany are owed by the Mediterranean nation. Their economy is quite insular too, meaning that should Greece stop exporting and importing as much as it does, it wouldn’t necessarily collapse nearby countries either.
Perhaps of most interest to UK businesses is what the Greek vote will mean for UK manufacturing. Well, the key statistic here that is for all of the exports to Europe that the UK make, only 1.2% were destined for Greece. Of course, it’s completely unfeasible that Greece would stop importing altogether, so we might only see a few tens of a percent falling away from that number. Indeed, the greater threat comes from a general fall in the strength of the European economy. With that, the UK could see exports drop by a few percentage points, which would put the UK economy on slightly rocky ground.
Thus far, the UK recovery has been relatively strong with two years of constant growth in GDP, albeit gentle and uneven growth. In the past quarter we saw growth slow from 0.8% in Q4 2014 to 0.4% in Q1 2015. That’s still positive, but it shows that the UK economy still isn’t completely out of the woods. Growth is still forecast at 2.4% in 2015 though, which shows that outside of the Greek crisis and their potentially imminent exit from the EU, the UK is on sure footing. That’s great news for manufacturers such as custom fittings, who should see their exports increase steadily, although we can’t yet assume that the events in Greece won’t affect us.