Don´t slip up with over “Greece”ing
The original cash machine?
With events in Greece taking prime news position, certainly the east side of the Atlantic, the main question that I am being asked is, “How will the Greek debt problem and referendum affect my investments?”.
It is said that, back in the BC years, Greece invented finance and all the baggage that it carries. It had the first financial crisis, with bad debt. Debt was subsequently written off and the currency devalued. Unfortunately this has not been an option for Greece now as they are part of the Euro.
Greece has defaulted on loans many times before, yet this never brought the rest of the world crashing to the floor. The word contagion is used an awful lot as the assumption by many is that the rest of the PIIGS (Portugal. Ireland, Italy, (Greece) and Spain) will follow suit. If this was to happen and Spanish banks, in our case, had problems, then there would be major concerns for those who had money with them. Bank risk in Spain has been around for a while and keeping a whole lot of money in a Spanish bank makes little sense. Here are some reasons:-
- Little or no interest paid.
- High charges for little or no gain.
- Inheritance tax liability for Spanish residents.
- Even greater inheritance tax liability for non-Spanish residents.
For those who are brave enough, a financial crisis is a brilliant opportunity to make money. Many are not prepared to be so brave with hard earned savings and, for these people, we have a proven solution with a household name. Very few people like volatility. In reality, volatility means that your money can go down in value, sometimes sharply. With the right approach, we can do away with volatility. Take a look at this graph illustrating the difference between the truly managed approach, the average cautious fund, and the FTSE100. See how consistent the managed fund has been compared to the roller-coaster ride of the others.
Greece is the word at the moment but this shouldn’t mean that all our lives should be dependent on what happens there. Living in Spain, being part of the Euro is the one that I want.
Grexit, Greferendums and the European effect
Recent events in Greece and the effects of now being in arrears with regard to their IMF debt repayment, cannot escape our screens. Now as Greece stumbles toward a referendum this Sunday, many are wondering what could happen next, and what will it all mean?
This article is to provide my observations and add to a recently written article by a colleague of mine at Spectrum, about Greece and potential implications of the current debt crisis.
One key point I would like to repeat from Daphne’s article here, specifically in relation to investing for your future is this:
“If there is a Greek exit, there may be some immediate selling off of (riskier) assets, but longer term, the economic impact to the rest of Europe should be limited”
From a relationship perspective I read a great article reported today in the Guardian that offers good insight into the likely impacts of the strained relationship between the Greek Syriza government and European leaders, as a result of the Greek government’s approach to debt repayment and austerity of recent weeks and months. I recommend it to you, here
As indicated by the author, Europe is prepared to be tough in negotiating with the Greek Prime Minister, knowing perhaps “For the euro elite, the dangers of Grexit are outweighed by the risk that larger states could follow a successful Greek stand against austerity.”
In my view, creditors such as these are always more willing to negotiate (and so debt repayment schedules can be flexible) where they feel they are dealing with a leadership that is less inclined to use political posturing and more willing to implement significant reforms.
No-one quite knows the outcome of the potential Greek referendum on Sunday, and it’s this uncertainty which markets do not like typically, and certainly, neither do European leaders negotiating with Tsipras like it! Fortunately for everyone it’s only 3 days until Sunday.
The political future of Tsipras and his government hangs in the balance. With a little luck, a pro-Euro-vote outcome from the people of Greece looking for stability and a recommencement of emergency funding from the ECB, will ultimately enable Greece to return to the ongoing challenges of reform. Dedication to such reform is perhaps the only real key to the prospect of negotiating in the future for some write-off of unrepayable debts.
This article is my opinion only and provided for information purposes, and does not constitute advice, opinion or any recommendation from The Spectrum IFA Group to take any particular action on the subject of investment of financial assets or the mitigation of taxes.