Also referred to as the “Grexit” from the EU, the rejection of austerity measures by the people of Greece have made the international monetary community a bit nervous, if not down right irritated. The Euro dropped against the U.S. Dollar and Japanese Yen on Monday with nervous investors shifting monies from the single currency to more stable currencies until the fate of the Greek economy is known.
As reported by Today’s Zaman, Turkey, along with other European trade partners, are growing more concerned that the impact of the “no” vote by Greek voters will reach farther than expected. Turkey, among other countries, have expressed deep concern that trade revenue will decline since nearly half of their exports are paid in Euros, while Turkish exporters pay for the cost of the goods in mostly U.S. dollars.
Turkey has good cause for concern. Not only does the drop in Euro value against the dollar mean a profit loss, the continuation of European Central Bank’s (ECB) monetary expansion policy until the fall quarter of 2016 means an even deeper cut to Turkey’s trade profit. Nearly 44 percent of Turkey’s exports go through throughout the EU markets, so the loss could be significant.
Yet income from trade with Greece itself will not impact Turkey significantly. As per Greece’s Finance Minister, Mehmet Şimşek, Greek trade problems would have little impact on the Turkish economy, citing limited trade and investments with the neighboring country.
Bloomberg offered its two cents on the situation with its report on Monday stating that while the European currency markets are still volatile, there is hope that renewed talks between Athens and its creditors will ease investor’s minds and halt the deprecation of risk-correlated currencies, including the Euro.
However, Greece’s currency crisis isn’t just compromising the euro against the dollar. Swiss National Bank President Thomas Jordan reported that the demand for Franc soared after the referendum was announced, while Australia’s dollar fell below.75 U.S. cents and Chinese stocks plummeted.
Sixty-one percent of Greek voted “no” to the IMF bailout and harsher austerity measures it required. The voter turnout was 62.5 percent.
Talks with creditors will start again, but it may be months before we know the fate of Greece. The German press office reported that Chancellor Angela Merkel and Frances President Francios Hollande will be meeting today to discuss the ramifications of the “no” vote, but both agreed that the Greek voter’s decision needs to “be respected.”
Until the dust settles from the results of the referendum, it is quite uncertain how the Euro will fair against the appreciating U.S. dollar and the Japanese yen in the coming months. Investors will have the difficult decision to take their money and run, or try and ride out this economic upheaval in hopes of financial redemption at the hands of an ECB and IMF bailout. Let’s hope the euro dropping against the dollar isn’t a sign of things to come.
Inquisitr writer Daniel Zhu explores the Greek debt crisis further here.
[Photo illustration by Christopher Furlong/Getty Images]