Greece is highly unlikely to be forced to return to its old currency the drachma to get itself out of its sovereign debt crisis, according to Barclays Corporate senior economist Brian Clark.
Although speculation has been mounting that the country could leave the Euro, a prospect that would see its currency devalued and cheaper for UK visitors, Clark dismissed it at this morning’s Barclays Travel Forum.
“I do not personally see that happening. Greece is a very small part of the Eurozone GDP although it’s probably having an outsized influence at the moment.
“There is still scope for a settlement that will kick in before we get to that stage (leaving the Euro). That would be hugely damaging for Greece, the value of its debt would go up as its new currency crashed.
“The knock effects would be the catalyst for pushing some kind of deal through before you get to that stage.”
Clark told delegates he saw exchanges rates generally becoming more favourable for travel firms with sterling strengthening against the US dollar and the euro.
He also said fuel would remain at current levels for the remainder of this year which although it remained high at $110 a barrel for Brent crude.
“One of the things that drove oil price up earlier in the year was events in the Middle east so to some extent you can’t model that,” Clark said.
Interest rates, the other key economic indicator for travel firms, are expected to start rising gradually towards the end of this year.
But Clark said he expected the current low levels to remain for up to five years during which time they would creep back up toward 3.5%-4%.
The general outlook for the economy was that it would pick up slowly but that consumer sentiment would not return to pre-recession levels for the foreseeable future.
Clark said unemployment would remain fairly high, particularly in areas dependent on the public sector but that inflation, currently at 45%, would start coming down.
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