“Should the euro continue to weaken as a result of the Greek election outcome, UK food and drink manufacturers will find their products more costly for Greek and other Eurozone importers,” said SmartCurrencyBusiness.com director Carl Hasty.
“This would decrease UK export competitiveness, and potentially price the UK businesses out of parts of the Eurozone market.”
Syriza sent shock waves throughout the EU when it swept to power during the election on Sunday January 25, after pledging to abandon the financial austerity programme imposed by Brussels.
Shock waves throughout the EU
The new Greek prime minister (PM) Alexis Tsipras has promised that the country would not default on all of its £179bn debt but vowed to end the swingeing public spending cuts, which have caused widespread social unrest.
Spokesman for the PM Euclid Tsakalostos told BBC News: “Nobody believes the Greek debt is sustainable. I haven’t met an economist in their heart of hearts who will tell you that Greece will repay all that debt. It can’t be done.”
Any failure to renegotiate the debt may result in Greece’s exit from the Eurozone, which could also destabilise the EU’s debt arrangements with other countries such as: Spain, Portugal, Italy and Ireland.
‘The floodgates have opened’
“The floodgates have opened,” said the currency specialist. “The victory of Greek party Syriza, in coalition with the right-wing Independent Greeks party, has opened up the avenue towards anti-austerity measures. This could be echoed further down the line within the Eurozone, as suffering southern states like Spain and Portugal gear up for elections later this year.”
A weaker euro could also disadvantage manufacturers in the domestic market, Hasty told FoodManufacture.co.uk. “Eurozone imports will become cheaper in sterling terms so UK food and drink manufacturers will also need to be wary of increased competiveness from the Eurozone as their exports become cheaper in the UK,” he said.
“This highlights the need to have a clear currency strategy so that you are able to control prices and margins effectively.”
Syriza now planned to negotiate with the European Central Bank for a debt bailout of about €7bn, raising the possibility of a Grexit or Greek exit from the Eurozone. The euro, which had already weakened in the week before the elections, dropped to an 11-year low against the US dollar following the results.
Given continuing uncertainties, Hasty advised UK businesses trading abroad to plan robust currency strategies to mitigate risk from currency fluctuations and safeguard their bottom line.