Ma­jor im­pacts of Grexit

Is­land op­por­tu­ni­ties from Greek with­drawal from Eu­ro­zone

The Guardian (Charlottetown) - - WEEKEND BUSINESS - Blake Doyle Blake Doyle is The Guardian’s small busi­ness colum­nist. He can be reached at blake@is­landrecruit­

Next week we will wit­ness what hap­pens when a de­vel­oped econ­omy, cor­rects. The Greek econ­omy has been liv­ing on bor­rowed time for years, re­sult­ing from un­bri­dled spend­ing and poor deficit man­age­ment over nu­mer­ous gov­ern­ments. Some may see sim­i­lar­i­ties to another Is­land cul­ture a lit­tle closer to home.

Greece has been sup­ported, ar­ti­fi­cially, by neigh­bour­ing states in the fed­er­a­tion of the Euro­pean Union for too long. Greece is a strug­gling econ­omy sur­rounded by stronger part­ners and propped up to avoid spillover ef­fects upon its neigh­bours. Their eco­nomic demise has been pre­dicted for years, and now we are on the cusp of their eco­nomic purge.

The world econ­omy has moved from fear over con­ta­gion reper­cus­sions to one of prepa­ra­tion and ac­cep­tance. So what can we ex­pect and will this eco­nomic tur­moil im­pact our gen­tle Is­land?

Greece has tech­ni­cally de­faulted on its debt pay­ments, and is po­si­tioned to exit the Eu­ro­zone in favour of res­ur­rect­ing its own cur­rency. The world, and cap­i­tal mar­kets, have been pre­par­ing for this out­come for some­time. In fact the ac­knowl­edge­ment of this cri­sis cli­max­ing has not re­ally im­pacted North Amer­i­can mar­kets in any sig­nif­i­cant way. Next week, af­ter the Greek ref­er­en­dum, mar­kets will re­spond; but cap­i­tal mar­kets have al­ready con­sid­ered the im­pacts.

Greece will de­scent into an or­derly chaos and the Euro­pean com­mu­nity will likely be sup­port­ive of Greece re­build­ing as an eco­nomic ally, as op­posed to Greece cre­at­ing a new union with Rus­sia, China or other eco­nomic part­ners. How­ever this tran­si­tion will not be with­out chal­lenge.

For the Greeks, the short-run is dif­fi­cult. For Is­lan­ders in­vested in the mar­kets, it will be stormy seas for a lit­tle while but things will sta­bi­lize and Greece will be in a stronger po­si­tion to ex­pe­ri­ence growth as they re­or­ga­nize. Will other economies fol­low Greece’s path? Likely and af­ter the ash will come the re­build­ing.

For P.E.I., we will feel im­pacts. Global growth and do­mes­tic re­cov­ery will be im­pacted. We can ex­pect less de­mand for our Cana­dian dol­lar, there­fore a weaker dol­lar and a con­tin­u­a­tion of low in­ter­est rates.

Low rates will keep the econ­omy mov­ing, but we have be­come so ac­cus­tom to a low rate en­vi­ron­ment we shouldn’t ex­pect much growth from this con­tin­ued pol­icy.

If pre­pared we will see op­por­tu­nity from a lower Cana­dian dol­lar. Snow­birds will hate to see our dol­lar drop fur­ther, but ex­porters should be look­ing at re­cently signed global trade deals and how we can ex­port our goods to new mar­kets in sta­ble economies like the U.S. Savvy busi­nesses should be po­si­tion­ing right now to en­ter new ter­ri­to­ries and ex­plor­ing new U.S. states south of our bor­der.

This will be an un­prece­dented time for Europe. The short-run im­pacts are un­clear, but over the medium-term the res­o­lu­tion will be good for Greece and the Eu­ro­zone; this will ab­so­lutely present medium-term op­por­tu­nity for Is­land ex­porters and even new econ­omy com­pa­nies that are proac­tive. Pre­pare and be ready for the un­pre­dictable; these are the en­vi­ron­ments that can ac­cel­er­ate or col­lapse mar­ket po­si­tions.

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