Grexit to the Left: Members on Greece, the EU and the Bailout….many and our point of view as well

Grexit to the Left: Members on Greece, the EU and the Bailout….many and our point of view as well

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Following a turbulent weekend that culminated with Greece’s Parliament voting to hold a referendum on whether or not to accept the terms of the latest bailout package, Greece woke up Monday morning to closed banks, stringent capital controls and plenty of uncertainty regarding its future as member of the Eurozone.Stock markets throughout Europe stumbled out of the gate on Monday upon announcement of the Sunday July 5 referendum, cheekily dubbed as the Greferendum by the mainstream media.

The FTSE in London fell by more than 2%, while markets in France and Germany dropped by 4%. European banking shares alone lost 10% of their value amid worries of a Greek default.

Banks in Greece, as well as the Greek stock market, will remain closed until July 7 and ATM withdrawals have been limited to 60 Euros per day.

Fears of a Euro collapse have shaken the continent. A Greek departure—colloquially referred to as Grexit—might lead to a domino effect, further weakening already fragile economies in Spain, Italy and Portugal, and also forcing them out of the Eurozone.Even though he doesn’t think a Grexit would be a problem for the monetary union, Thiago Hupsel, a member from Brazil, takes a similar stance, stating, “The default and consequent withdrawal of Greece may trigger a serious moral hazard that could let the market think that other weaker members may be next.” He adds that, by studying this week’s movements, “we could observe that those countries’ bonds plunged, while those for the UK, France and Germany had their yields lowered in a clear movement of flight to quality.”

While financial experts believe the European banking system is better equipped this time around to mitigate the impacts of a Greek default, the fact that this is unchartered territory makes it difficult to accurately predict the market’s reaction to a Grexit. Add to this a rapidly shifting political, economic and social landscape, and it only becomes more complicated to forecast Greece’s and the Eurozone’s future.

Belinda Wong, another member and Director at Leader Corporate Services Limited in Hong Kong, summarizes this uncertainty nicely: “It is unclear how the Greece issue will affect the EU because many things need to unfold in the next few days and weeks. Since Greece has announced it will not repay its loan to the IMF, it remains to be seen what this default will trigger in Greece, the EU and the international banking system.”As evinced by the range of views collected from other members, perspectives on the outcome of this crisis and its effects on the EU and the financial system cover the whole spectrum.

Dimitrios Kyriazis, a Doctoral Researcher and Tutor at Oxford University, suggests that the recent impasse has been caused by political and ideological differences. “The handling of the Greek government’s requests will set a precedent for other crisis-ridden Eurozone countries. The stakes are very high because both the creditors’ failure to keep the Eurozone intact and Greece’s failure to remain in the Eurozone will haunt them for years to come,” he says.

According to Yaroslav Abramov, Counsel at Silver Seal Advisers in Kyiv, Ukraine, there are two negative economic outcomes to a Grexit. First, there would be “an additional loss of confidence in the Euro as an instrument for savings,” further indicating that EU and IMF policies are inefficient and adversely affecting the integrity of OECD regulations. Second, businesses are bound to fall out of favor with Greek banks such as Hellenic, Piraeus, Alpha and Eurobank, leading to “a new migration of capital.”

Shaukat Murad of Dubai-based Alpha Management Limited believes Greece overplayed its hand by putting the issue up for referendum: “I think Greece has over-estimated their importance to the Eurozone. The Eurozone, although somewhat weakened, will survive a Grexit. The Greeks need to consider that even after receiving all those billions of dollars, their economy is still contracting, so how will additional billions help the economy climb out of its present predicament?”Anuj Sharma, Director of Abacus Offshore Seychelles, looks at it differently. “Greece remaining in the EU is more important for the EU than for Greece since losing a member means membership is reversible, and this could take down the Euro’s near-term stability with it,” he says.

Dmitry Tratas, a Russia-based specialist for Aragonia Group, is more sanguine about the whole situation. As long as the negative political effects involved are overcome, he regards a Grexit as financially beneficial to all parties: “The Eurozone would feel better without any additional ballast, and Greece could devalue its currency so that their products and services would be more attractive in Europe. “

On the other hand, Arun Gupta of India’s G D Singla & Co. Chartered Accountants stands somewhere in the middle, claiming a Grexit could lead to a paradoxical situation: “If Greece does well upon exit, then others in the Eurozone might consider the option of exiting. If they don’t, then that would be bad for the country.”

Many other members voiced their concerns over the hard times being experienced by the Greek people and the aging of the European population.

Steven Landes of SH Landes LLP, an accounting and auditing firm in London, states, “The very sad scenes with ordinary people suffering on a daily basis due to the actions of their own politicians and those of the EU” highlight “everything that is wrong with the EU and strengthens the case for a British exit from the Union.”Likewise, Spyros Binias, a Tax Lawyer with Loyens & Loeff in Luxembourg, added that throughout this entire situation, “The only constant is the living conditions of the Greek people, which have deteriorated and continue to do so, and the current financial aid on the table is not perceived as being of help by the current government and many Greeks too.”

Furthermore, Hendrik Van Duijn of DTS Duijn’s Tax Solutions BV in the Netherlands brings up an interesting point, saying “The local pension schemes and how they are affected by the aging of people can form a genuine threat to the system,” and “the situation in Greece is just the forerunner” to this entire affair.

Others see a potential Grexit as an opportunity for other European markets to flourish.

Alberto Balatti, Founder and Managing Director of MaltaWay, thinks the ongoing situation will “push more people to move their businesses, assets, and wealth away from Europe’s PIIGS countries and into jurisdictions like Malta.”

Maxim Schvidkiy, Managing Director at SHFM Overseas in Sweden, mirrors this position and says he’s advised his clients to “diversify their midterm financial assets and instruments within non-Euro EU countries like the UK, Denmark and Sweden.”Furthermore, Iliyan Ivanov, a Lawyer with Atanassov and Ivanov Law Firmin Bulgaria, suggests that, at a micro-level, this situation will provide greater “financial and legal independence of international subsidiaries of Greek banks” and a “freer movement of goods, services and capital, for example, small Greek businesses incorporating in Bulgaria and managing their affairs from there.”

Back in Greece, however, some just want a quick agreement.

Eleftherios Erkekoglou, a Partner at KSi Greece, says he wants a EU-sponsored solution that “will provide space for Greece to breathe, work, create and pay off.” He adds, “I strongly believe that Greece cannot be a non-EU country. It would somehow affect other EU countries, but it would be a disaster for my country. The problem is that the Greek people cannot afford any more short-term solutions and we need to find a future goal to strive for. We need solidarity and understanding from other EU countries.”

Panagiotis Spatiotis, an Athens-based private tax specialist, shares this sentiment, believing “it is in the best interest of every part to end this crisis. The EU wants to remove uncertainty from the European economic climate in order to achieve higher growth and end any discussion about the sustainability of the Eurozone.”

One thing is certain: Greece is at a crossroads, and a decision will be made, at the latest, come Sunday.

Grexit - problems in Greece

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