Suffolk: IoD economist warns business leaders of Greek euro exit
IT WILL take “unforeseen economic and political miracles” to avoid Greece crashing out of the eurozone, a leadiing economist has told a group of Suffolk business leaders.
Graeme Leach, chief economist and director of policy at the Institute of Directors, gave his perspective on the euro crisis and its effects on the UK economy at a breakfast event held by the Suffolk branch of the IoD at the West Wing at Ickworth House.
“The euro crisis never went away, but even for those who thought it had, recent weeks have been an ugly reminder of the downside economic risk to the UK economy,” he said.
He said the potential solutions lay with fiscal and monetary policy but that “Germany and France have a fundamentally different concept of what fiscal union means. To Germany it means hard binding rules in order that the Club Med economies don’t get in this mess again. For France fiscal union means Germany opens her cheque book.”
He continued: “It could be argued that at 1 minute to midnight Germany will blink and baulk at the prospect of ‘Grexit’ and financial contagion and capitulate to Greek demands to ease the austerity programme. This argument is appealing but flawed nonetheless. Germany has had ample opportunity to ease off on the pressure for austerity but has failed to do so.”
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Mr Leach said he didn’t believe further austerity measures were sustainable in Greece. He said: “Barring unforeseen economic and political miracles, Greece is going to run out of money, default and crash out of the euro.”
He added: “I think all the Club Med economies will exit the euro at some stage but the timing of the second wave of exits is less clear. It could be quick, but it might not be if the European Central Bank decides to act on a truly massive scale. This of course begs the question why it didn’t act in this manner before any Grexit.”
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He said the uncertainty on the continent clearly added to the gloom at home, in the wake of the UK falling back into technical recession in the first quarter of 2012.
“What business needs now is the confidence to invest and recruit, because UK plc has the cash – around �750 billion at the last count,” he said.
“But the longer the euro crisis goes on, the longer companies delay taking on staff and taking the plunge with investment. In my view we’re entering the end game for Greece. What happens over the next six months could largely determine UK economic prospects for the next decade.”
The breakfast was sponsored by Barker Gotelee, Ensors, Quantrills and The Ideas Centre.
IoD Suffolk’s next event is its Annual Conference on June 20, which is open to all and has keynote speakers including ITV business editor, Laura Kuenssberg and former Lebanon hostage John McCarthy. For further information call Caroline Kearney on 07917 699498 or vsit www.iod-suffolk.co.uk .