By Loren Moss
As Greece gears up for its second election in eight weeks, economists, citizens, investors and other stakeholders are confronted with the stark possibility of Greece returning to its historic currency denomination of the drachma after 11 years of using the euro. The looming June 17 elections are viewed by many observers as a last ditch effort to form a coalition government able to resolve the national impasse over whether to accept European Union austerity mandates or to default on sovereign debt, leading the country down a lonely path of chaos and uncertainty.
Possibility of Drachma Return is Real
“If Greece elects an anti-austerity government, it will definitely make the likelihood of a Greek return to the drachma a real possibility,” said Nicoleta Anastase, an economist and European Union (EU) integration specialist based in Bucharest, Romania. “By virtue of the elections, the Greek polity would be voluntarily rejecting the euro. Voting in another anti –austerity government would make their wishes clear.”
Though pundits still believe that Greece is more likely to stay within the euro currency, the upcoming elections may prove the pundits wrong. Not only is the future of the Greek economy at stake, but there is also a fear that the withdrawal of Greece from the euro may have a domino effect and bring down the already weak economies of Spain, Portugal and Italy. While Greece’s economy makes up only a small part of the euro’s economic activity, Spain and especially Italy are another situation altogether. Italy is especially considered “too big to fail” – that is to say, it is simply too big for Germany, along with France’s help, to structure a bailout package capable of an effective rescue.
“The problem for Europe is that a Greek exit could trigger economic collapse in Spain, Italy and Portugal, not only driving the region and possibly the world into recession, but could also – and I am not saying this is likely, sink the euro as a common currency if these other three countries also reject austerity packages likely to be mandated,” said Anastase.
Potential Global BPO Impact Looks Mixed
This all presents a mixed bag for those in the global outsourcing business. While a devaluaed drachma and Greece’s high unemployment rate, which reached 22% in March 2012 according to the Telegraph (and exists among a very educated workforce), would certainly present an attractive cost structure for wages, the long- and even short-term uncertainty, along with civil unrest and political instability, make presenting a business case for ramping up significant business operations in Greece at this time a tough sell. Not only is the business climate perilous, but the potential chain reaction caused by a Greek separation from the Euro could drag down the economies of Europe and even sink the rest of the world into a recession.
Datamonitor has Greece’s BPO services sector slated to reach $823.7 million in 2013, up from $643.2 million in 2008. CRM and Finance/Accounting make up the bulk of Greece’s BPO activity.
While there may be opportunities on the Aegean shores, executives must navigate diligently – analyzing carefully all the contingencies, including worst–case scenarios, and be in a position to move and react quickly to changing conditions on the ground and at EU headquarters in Brussels.
This post first appeared in BPO Outcomes