Dan Hyde And Ruth Lythe
18:35 EST, 15 May 2012
03:12 EST, 17 May 2012
The International Monetary Fund was today preparing for Greece to leave the euro as talks to form a coalition government finally collapsed. IMF head Christine Lagarde said it had to be ‘technically prepared for anything’ after Athens confirmed that fresh elections would be held next month. In Britain, the Treasury confirmed that it was keeping British contingency plans for a Greek exit of the euro – dubbed ‘the Grexit’ – under active review.
Like 2.3 million other British people every year, the O’Reilly family are heading off to Greece for their summer holiday.
June O’Reilly, 62, and her husband Kevin, 61, booked the trip to the Greek island of Crete with eight other family members months ago without a second thought.
But they fear this long-anticipated break and the €1,000 they have already exchanged for the trip may be in jeopardy.
Political turmoil in Greece, and an increasing threat it may withdraw from the euro, have left many holidays like theirs in peril.
Family holiday fears (clockwise from top left): Jade, 17, her mother Debbie, Matthew, 13, grandmother June and Megan, 11
This unrest also had a knock-on effect on the investments of millions of other British savers.
Mrs O’Reilly, a nurse, from Skipton in North Yorkshire, paid for the flights and accommodation separately — so they are not covered by ATOL protection.
‘We are starting to feel like this holiday is fated,’ says the mother of six and grandmother of 13. ‘If the problems escalated and we decided not to go, we wouldn’t get any of our money back.
‘I wish I hadn’t bought those €1,000 already. Who knows what currency we could need? If I’d known Greece could leave the euro I would have held back, but now it’s too late.’
Travellers have two real risks to their trip if Greece does withdraw from the euro: one from the potential disruption from rioting or protests; and the other from what this means for their spending money.
So it’s vital holidaymakers hoping to top up their tans on a Greek beach this summer check their travel insurance before they head off.
Trips to Greece could be in jeopardy if the country exits the euro
There is little need to worry if you’re flying out to Greece in the next couple of weeks.
The Foreign and Commonwealth Office says travel is still safe. However, monitor its advice carefully as your departure date gets close.
Bob Atkinson of Travelsupermarket says: ‘You should opt for a travel insurance policy that will cover you if you if there are strikes.
‘In reality, this is the kind of disruption you’re most likely to experience, for example, delays caused by protesting air traffic controllers or strikes at ferry terminals.’
If a strike, which was announced before you bought the policy goes ahead, check with your insurer before you jet off that you’re covered for any disruption. Insurers can use riots or political instability in a country to wriggle out of paying claims. Before you set off, check what’s your insurer’s stance on this.
Remember to also choose a policy that will cover you if your hotel or hire car company goes bust. If the holiday company has to cancel the trip because of riots or disruption in Greece, you should be offered an alternative if you’ve booked a package holiday, which is covered under the travel industry’s ATOL rules. It is also responsible for getting you home if there is a problem with your flights.
However, if you’ve booked your trip on your own, you won’t be covered by these rules unless you book two or more elements of your holiday through a website such as Expedia.
YOUR HOLIDAY EUROS WILL GO FURTHER
If you’re heading to Greece this summer, buying euros now will mean you will be able to lock in the best exchange rate since 2008.
For every £500 converted to euros, a family will get an extra £47.41 this year compared to last summer.
However, it’s worth taking a few precautions in case the country leaves the euro while you are there.
Even if Greece decides to quit the euro today, it’s unlikely the currency will stop becoming legal tender immediately. It will take time for a new currency, such as the old drachma, to come back in.
For trips soon, any currency bought should be safe. But experts advise taking a few extra hundred euros in cash than you normally would.
This is because of fears that cash machines and electronic banking systems could freeze up for days if Greece crashed out of the euro.
And try to split your euros into smaller notes.
However, there is a further concern. Each country in the euro has its own marked coins and notes.
To the untrained eye, there is little difference between a Spanish €1 coin and a Greek €1 coin, and they are also accepted in any other eurozone country as a matter of course.
The fear is that should Greece withdraw from the euro, the ‘Greek euros’ may stop being accepted in other countries or be worth less than the normal euro. However, experts say this is highly unlikely as it would be practically impossible to administer.
The biggest threat is to those travellers who have stocked up on euros for their holiday to Greece later in the year — people like the O’Reillys, in other words. And the crisis has long-term implications, too . . .
£30 BILLION LOST FROM SAVERS’ NEST EGGS
Almost £30 billion has been wiped off the value of Britain’s top companies, gouging huge chunks out of savers’ nest eggs — driven by fears that Greece is to pull out of the euro and that countries such as Spain may be in greater financial difficulty than feared.
On Monday, the FTSE 100 index of Britain’s biggest companies plunged 2 per cent to hit its lowest level this year at 5466. That means that in just one week, an ordinary saver is roughly £1 worse off for every £10 invested across leading British companies.
And the pain is set to worsen until European politicians find a solution to the crisis. John Bennett, a fund manager at Henderson European Focus Trust, says: ‘The short term is likely to see yet more volatility, scares, panic, plunges and rallies as the eurozone crisis deepens.’
But for some investors it is an opportunity to buy European funds cheaply and reap the rewards of a long recovery in Europe. However, what you do with your money depends on how close you are to retirement or how adventurous you feel.
WHY FEAR COULD COST YOU DEAR
Cautious savers should be less exposed to the tumult and should not panic. Anyone who has always had worries about the stock market is more likely to be in an ordinary savings account or bonds. Selling your investments in a mad flash of worry could be disastrous.
‘It’s natural to react to this sort of event based on emotion and fear. But you can easily put yourself at greater risk by doing so,’ says Adrian Lowcock, of Bestinvest.
The 2008 credit crunch market madness is a perfect example. Hordes of panicky investors sold everything after the FTSE 100 sank 8 per cent in a day on Friday, October 10, 2008.
But just three days later, the market bounced back 8 per cent due to a £37 billion bail-out for Britain’s banks. A saver who had £50,000 invested on Friday and sold everything on Monday morning was £4,000 down. Investors who sat tight until Monday evening still had £50,000 to their names.
If you are investing now — or close to retirement — you could turn to traditional safe havens such as gold and government bonds, called gilts.
But be aware your money is still at risk. Even the price of gold has moved 25 per cent over the past 12 months.
Cautious savers are likely to hold a large chunk of their money in bank and building society savings accounts and cash Isas. Up to £85,000 (£170,000 for joint accounts) of your cash is protected by the UK savings safety net at each bank that goes bust.
Nearly all savings providers in Britain are part of the scheme, including the likes of Spanish-owned Santander.
A handful, such as Dutch-owned ING Direct, are covered under foreign safety nets. In Europe, the guarantee is worth up to €100,000, which could work out at less than £85,000, depending on the exchange rate.
PROTECTING YOUR RETIREMENT FUND
If you plan to retire soon, you should strip most of the risk out of your pension and Isas. This means moving out of equities — shares and stock market funds —and into government and corporate bonds and cash.
But there is another side to this. When the euro crisis broke last summer, lots of money poured into UK government bonds. This sent the prices rising — good news for those who were approaching retirement.
But the rates on annuities, which convert a pension pot into retirement income, tumbled as a result. They fell from £6,000 a year on each £100,000 in a pension pot to £5,400 in just four months — a drop of 8 per cent. ‘Move a large part of your pension fund to cash if you are going to buy an annuity in the next five years — ideally, you will be 100 per cent in cash on the day you retire,’ says Jason Witcombe, an independent financial adviser at Evolve.
Newly retiring pensioners can protect themselves using a fixed-term annuity: they have a limited life of guaranteed annual payouts. But there are still risks, as annuity rates may fall further.
HOW TO PROFIT FROM DISASTER
For more adventurous investors —and those who won’t need their money for several decades — the euro crisis could transform into an enticing opportunity. As stock markets tumble, shares and funds become cheaper. Buy at low prices and you can reap the rewards of any recovery.
But be prepared to hold on for at least ten years before counting your gains. You need to put money into funds in different regions across the world, and companies in a variety of industries.
Darius McDermott, from advisers Chelsea Financial Services, says no more than 10 per cent of your money should go into funds heavily exposed to the European crisis. Good bets include BlackRock Continental Europe and Jupiter European Special Situations.
Ben Yearsley, of Hargreaves Lansdown, recommends Melchior European Selected Opportunity, or Henderson European Special Situations for very adventurous investors.
If EU powerbrokers stump up the cash for a Greek bail-out, stock markets could sky-rocket rapidly.
But brave investors should still be wary of chasing high-risk funds.
Consider emerging markets for long-term growth. Mr McDermott recommends Rathbone Global or MG Global Emerging Markets.
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We’ve just come back from Crete and they need us to go over there – it’s very quiet and believe me they need the tourism.
I hardly think you will be left high and dry if they change things whilst on holiday.
Get a grip people!!!
What a load of!!! I live here and i think i know a little more than a reporter sat in an office in England!!!
I work very hard here i also pay my taxes.
we rely on tourisum here not just from England. And the way this is portrayed to put people off coming here to sell your papers i think you should be ashamed of yourselves!!!!!
Back in 1992 the UK was forced to leave the ERM because we could not maintain the financial levels required to join the Euro. Greece was in a similar situation but fudged the figures to make it seem that they were ready. They did this because they knew how they would benefit from all of the EU subsidies and despite have vast amounts of money given to them on a plate, they have used it to overpay themselves and retire at unrealistically young ages with over inflated pensions. This is unsustainable, just the same as UK public sector pensions are totally unrealistic. Something has to crash and in the case of Greece; they have had it too good for too long at other counties expense. Enough is enough, they should return to reality and the Drachma. People will still go on holidays there and if anything, get better value, which in turn will encourage even more people to do so, which will benefit the Greek people too.
Don’t be silly. I booked my holiday last week to Greece. If anything, going there on holiday will help the situation. The reason we got into this mess in the first place is because ppl were out for themselves instead of working together. And I don’t just mean the Greek politicians… Pull yourselves together ppl!!
I live in the UK and have a home in Crete. The people are lovely, Crete is beautiful and all this scaremongering isn’t helping anyones economy.
Just why do the media keep doom mongering about everything? I intend to spend my holiday picking grapes in the next village I’m confident my Euro will still buy a litre of really good wine, pas de problème, mes amis.
To be honest I could not care less about a few chavs losing their holidays and a few toffs losing their investments. As long as it does not affect me, thats the main thing. – John Long, People’s Republic Of Liverpool, 16/5/2012 10:41……………………There might be a bit less stuff about for you to rob though.
– rob boberts, far far away, 16/5/2012 11:11
————- Scouseist, I suggest you visit the Republic Of Liverpool at once to apologise for this outburst.
Please don’t listen to the scaremongering. I am currently holidaying in Corfu and apart from the highly unseasonal rain, it’s a lovely place to be with friendly folk who genuinely want us here. After this I am visiting Kefalonia for a month, looking for a holiday home to rent there. I refuse to be put off by all the scare tactics in the media – Greece is a lovely country, they want us here, we are welcome – come on over, it’s great!
Already there…. What a strange newspaper article. Full of experts spouting nonsense. Can’t go into micro/macro economics here. Suffice to say I’ve never met an expert who is not full of it yet! In Faliraki at the mo. Yassoo!
“…the more the prices drop, the cheaper they are” advises the North London management consultant. Don’t think I’ll be consulting him for advice of any kind.
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