By Karl Hartey, managing director, Applewood Wealth Management
There has been rising panic that the sovereign debt crisis will result in the eurozone breaking up and Greece leaving. However, I feel this would be the best case scenario as it would afford Greece the opportunity to rebuild itself.
The Greek situation seems to lurch from one crisis to another, with austerity measures failing to work and cash-only sales transactions resulting in very little VAT or income tax for the Government. As such, other countries cannot continue to lend money to those who don’t have the ability to pay back.
It will undoubtedly be a difficult transition for the whole of Europe if Greece leaves the eurozone, but looking at other countries that have been devalued such as Mexico, Brazil, Argentina and Russia, they have all coming bouncing back within a 3-5 year period.
Stock markets are likely to suffer a knee-jerk reaction if Greece leaves and it would be fair to expect a 1000 point swing in London, but once the market has settled they would recover and the eurozone without Greece would be a stronger place.
For those with investments, it is worth looking at the level of risk contained in those investments as well as the equity exposure to Europe and I would recommend looking to reduce this through internal funds switches.
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