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An Entrepreneur’s View of ‘Grexit’

Entrepreneurs have to manage and develop their business during all economic conditions. My book 'Drive Like a Real Entrepreneurs' states that there have been 40 such manias, panics or recessions in the last 350 years! Is ‘Grexit’ any different? What are the causes and what will be the effects?

Tony Blair was interviewed recently and stated in his opinion that Grexit would be a bad event for the Eurozone. There were no fundamental reasons nor factual comments given for this resounding level of support for the Eurozone support of a failing economy such as Greece and keeping the current conglomerate, as one. The only reason that could be considered to be supporting Blair’s statement, is the ‘loss of face’ and ‘idealism’ placed on the Eurozone and its guiding principles that a state cannot be left behind or cast aside. There is a cost to that policy and one which member states can ill afford.

All entrepreneurs want to have is to be able to operate within an environment, consisting of stable exchange rates and interest rates, such that the consumers to whom they sell are themselves doing well, feeling good and therefore spending.

However the stability cannot be forced by fixing exchange rates or interest rates. This has been tried many times in the past and failed. The UK experience with the ERM in 1992 is the most recent case in point and failed miserably and very quickly.

The EU as a trading place, market and partnership is an excellent concept but that is as far as it goes. The Euro therefore has to be fatally flawed as it is fixing the exchange rates for those member countries. It has to effectively be, therefore, the currency of the strongest member. The cost is always placed at the door of the stronger members of that society. Germany, France and the UK are those states. Without sovereign convergence, currency convergence cannot exist. Greece has to be let go, so that it can recover, this may take a generation.

Greece needs to find the right exchange rate for the ‘drachma’ to export goods at the right price, not at a fixed price. Greece needs to balance or go a long way to balancing its own books. It cannot, as a country, be expected to suddenly operate in the same marketplace nor behave the same as a fully industrialised Germany, nor an agricultural France nor even the refined ‘service industry’ state or compete with the educational establishments of the UK.

If Greece is not allowed to exit the Eurozone (and please recall that its figures were fixed to allow it to enter) then there is no country that can be exited. What incentive is there for the other countries to be in line and create sound economics? There is none.

Greece's situation is no different to another blip on the worldwide economic front. The world banks may take a hit for a while but have already surely reduced their exposure. The Greeks deserve better treatment and will find their way again. In my opinion, there will be no huge effect with Grexit. Let it happen.

Next week I will be discussing ways to overcome barriers of entry. In the meantime if you have any questions or wish to share your opinion on this post then please do get in touch.

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