New travel advice for Greece

The government has updated its advice to tourists visiting Greece, reassuring them that they can continue to make withdrawals from cash machines up to their usual amount, despite the €60 daily maximum for Greeks, and that there are no restrictions on taking unspent euros out of Greece.

The new advice adds that "the system for paying with debit and credit cards for retail transactions continues to function".

However, travellers are still warned that banking services, including cash machines and credit card processing, could potentially become limited at short notice.

And the suggestion that visitors should take cash for emergencies is hardened.

The official word is now that it should "cover the duration of your stay" and those carrying cash are now encouraged to "take appropriate security precautions against theft".

Broken, panic-ridden eurozone

Events in the eurozone in the last few days look mysterious, at first, and on reflection, even more worrying.

This matters because our savings, our pensions and our mortgages could be affected.

What's the mystery? When you think about it, the outcome of the Greek election was the most stability-inducing one that the financial markets could have hoped for.

But they got the jitters immediately afterwards. The returns (or yield) on Spanish 10 year bonds, or IOUs, rose well above 7%.

What that means is that big investors were demanding a higher interest rate to compensate for the growing risk of lending their cash to Spain - even though the Greek result was probably what bond investors would regard as good news.

And the rate has been getting close to unsustainable levels, levels at which the country can't carry on borrowing for long.

Not much had changed in Spain over the previous few days. Yet the Greek outcome seemed to make things worse. Why?

Was it simply because eyes were temporarily averted by the distraction of an election elsewhere?

Or was it because dastardly speculators, profiting from pushing down the value of investments in wobbly countries, were shifting their sights from Greece to Spain?

It seems as though the real answer could be that there is a feeling of chaos, dislocation and deep pessimism amongst the investors and dealers who inhabit what we know as "the markets".

One expert in eurozone bonds just told me:

"This is a completely broken, dysfunctional market, experiencing bouts of panic. And there's a complete lack of confidence in the ability of eurozone leaders to shore it up."

For these operators Greece was a sideshow. In fact, Spain is also a sideshow. Italy is the horror that blocks their vision so much that, in financial terms, they can't see the other side of it.

The reason is that it would cost so much to rescue Spain, it's not clear how an Italian rescue could be paid for. So when they turned their binoculars to Spain after Greece, their hands start shaking again.

Think about it. There are four big countries in the eurozone: Germany, France, Italy and Spain. Can you have two of them on life support?

Hence, the worries about the survival of the euro persist. And, as we keep being told, damage to the euro has a knock-on effect on the UK.

It's what George Osborne and the Bank of England were scared of last week when they announced they would flood our banks with extra lending power.

Then many thought they were acting just in case Greece imploded. Now we know that emergency measures were probably going to be needed, whatever result came out of Athens.

Greece - take a deep breath

                                       "Headquarters! Should I be panicking?"

You'd be forgiven for feeling edgy about the Greek election after reading comments like this on Greece leaving the euro:


Economic armageddon
If Greece leaves the euro, Germany could be jolted into action and pursue fiscal unity in Europe, smothering any panic among other states. If the Germans don't act, it could lead to an economic armageddon.
Guardian


The financial equivalent of the Cuban missile crisis
It's not clear who's going to blink at this point. My guess is that, in the end, there will be a bit of blinking on both sides. This is the financial equivalent of the Cuban Missile Crisis.
Niall Ferguson, Historian


Europe's Lehman moment
Many now fear that Europe is about to suffer its own “Lehman moment”. The Lehman bankruptcy, of course, precipitated the worst financial crisis in generation.  
Financial Times


Political turmoil, human hardship
Large numbers of pensioners and households will find their savings are wiped out directly or inflation erodes what they saved all their lives. The potential for political turmoil and human hardship is staggering. 

Baseline Scenario

The cost is 37% of the eurozone's economy
The cost of Greece being ejected from the euro: Around €3.5tn - 37% of euro area GDP (equal to 135% of German GDP) .
European shares plunge 30% - back through their lows of 2009.
Aviva Investors


Who am I to say they're wrong?


But Armageddon is supposed to be a battle bringing on the end of the world, while the missile crisis carried a danger of nuclear war.


The Lehman collapse was a financial disaster, so maybe that's more apt - though the point then was that people were totally unprepared for what happened.


Let's take a deep breath: "Don't panic yet, Mr Mainwaring!"

Euro scare story

The European Central Bank (ECB) has dismissed a warning from a UK travel company that holidaymakers should be careful of Greek and Spanish banknotes.


The Association of British Travel Agents (ABTA) distanced itself from the warning as well.


Dial A Flight, which organises travel for 450,000 people a year, told its customers in a blog that "anyone holding Greek Euros may find themselves out of pocket" if Greece were to leave the eurozone and stamp, or endorse, its euro notes to identify them as a new currency.


The company suggests there is a risk that other eurozone members might not accept the notes -- whether or not they had been stamped -- and that Spain might be the next to suffer.


Notes printed in different countries are identifiable from a letter at the front of the serial number: Y in the case of Greece and V for Spain.


But a spokesman for the ECB said "euro banknotes are legal tender in all euro nations" and that they remained legal tender "wherever they are printed".


ABTA said that while no one knows what would happen if Greece left the euro, "A euro is a euro - it doesn't matter where it is printed".


After I started making enquiries, Dial A Flight removed the blog from its website.


There will be lots of scare stories as Greece's problems persist, but if anyone wants to know what the symbols on euro banknotes mean, the ECB provides a handy guide.


UPDATE - and here's what the British Bankers Association says...

"There is no difference between Euros from different countries. They are worth the same from one end of the Eurozone to the other, regardless of where they are issued. The Euro is a single currency and worth the same whether French, German, Greek or Spanish."

Jump in euro rate for tourists

Leading bureaux de change are selling euros at a rate of 1.20 to the pound for the first time in three and a half years.

The jump reflects worries about the eurozone in the wake of the Greek and French elections. But the result is that British travellers are getting 10 per cent more for their money than a year ago.

Travelex is offering 1 euro 20.8 cents -- it was last above 1.20 on 4th November, 2008. The Post Office is paying 1euro 20.7 cents.

High Street banks are still offering lower rates, but some specialist money-changing services will pay even more.

The rate at certain Sainsbury's stores has risen to 1 euro 21.19 cents.

Watch out for Greece

The governor of the Bank of England, Sir Mervyn King, has warned that bailing out Greece will only buy the Eurozone time, until the country finds a way of dealing with its huge debt problems.

At a news conference for the Bank's Financial Policy committee, set up to oversee the UK's financial stability, he said the troubled Eurozone countries posed the most serious and immediate risk to the UK.

Sir Mervyn said that although UK banks have limited direct exposure to the debts of Greece, Ireland and Portugal, they could have lent to other international banks which were exposed.

And he added that the bigger risk was a crisis of confidence in which banks stop dealing with each other because of fears that one of them might be heavily exposed.

The governor warned that simply lending a bit more to Greece would never be the answer to a problem which was about the country's solvency -- at best it would provide a useful breathing space for a more fundamental solution to be put in place.

Asked whether the crisis was like the collapse of Lehman Brothers which helped cause the credit crunch, he said only in that this situation was also a mess.