Beware of Greeks

So there is turbulence within the Euro zone today concerning Spanish banks. But their economic minister still maintains that its speculation that they’ll seek a bailout for their banking sector. You can be certain when a Minister declares something is speculation it’s not long before it becomes a fact. 

But even if he’s to be believed we’ve all still got a problem and that’s Greece.

If Greece was to ditch the euro and leave the single currency we’d be in the proverbial. Yes. Even the UK. Some economists reckon that it would knock 3.5 per cent from UK output and it could be a whole lot worse.

If we look back at the time of the crash in 2008-09 the UK’s output fell 7 per cent. Now that wasn’t because those wicked bankers stopped giving out cash. But it fell because the world didn’t heed Corporal Jones’s advice “don’t panic” it did panic and consequently output went down in the UK. 

It there was a similar reaction to Greek’s exit, then the UK generally and Wales in particular would be in real difficulties.

Many have pooh-poohed the Greek default by saying that our exposure to Greek bank’s is very low. Yes, sure it is. But, and it's a very telling but, we’ve lent to countries that have lent to Greece. 


If they take a fall, we do, in turn. Put simply it’s a domino effect.

And certainly the worries about Spanish and Italian banks would then cease to be speculation. There would need to be a massive bailout and the UK would be involved in one way or another.

If our banks had to do "write downs," their profits would take a hit. It doesn’t take a great deal of imagination to guess what their response would be - a lending freeze. 

Welsh businesses would have to whistle if they wanted money to expand or help with their cash flows.

But with half our exports going to Europe any drop in confidence in the euro zone with a Greek exit would hit demand. Confidence would go out of the window. And as we’ve seen over the years if London and the South East suffer, the Welsh economy becomes even sicker.

So forget those euro sceptics that take glee at Europe’s discomfort. The message “it’s not us, we’re not in the euro” is both hollow and false.

It does matter to us, especially to those parts of the UK that are already feeling the pinch of the recession. Greece’s problems are also Wales’s.

In the words of John Donne 

No man is an island,
Entire of itself.
Each is a piece of the continent,
A part of the main.
If a clod be washed away by the sea,
Europe is the less.
As well as if a promontory were.
As well as if a manor of thine own
Or of thine friend's were.
Each man's death diminishes me,
For I am involved in mankind.
Therefore, send not to know
For whom the bell tolls,
It tolls for thee.