Eurozone problems affecting UK?

[AJI]

I keep hearing stories on the UK media reporting that the Eurozone problems are affecting the UK.
But are we not in the best position by not having signed up to the Euro?
Surely the countries that should be worried are the Euro currency countries?

I'm not an economist at all, so could somebody explain why the eurozone is 'damaging' the UK?
I would have thought that as the Eurozone 'fails' the UK 'wins'. So good for us yes?
Is this not the reason why the pound is growing fast against the Euro over the past number of months?


I just keep wondering why the likes of Osbourne keeps saying that the UK growth is adversly affected by the failing Euro.
http://www.telegraph.co.uk/news/politics/georgeosb...

Ok, so products UK exports become more expensive as the pound rises, but as we are a financial services provider and the pound is quite 'stable' it then attracts investors and places the UK as a 'safe bet' in relation to our neighbouring Euro countries.

(I could be well off the mark, or maybe not. But if somebody could breifly explain in laymans terms I could understand it better).

[Cupramax]

AJI said:

I'm not an economist at all, so could somebody explain why the eurozone is 'damaging' the UK?

I'm not either, but its likely to be our exposure (i.e. our banks and institutions loans) are exposed to debt that is about to tank i.e. Greece, then Spain and Portugal when they go tits down the line.

[steveatesh]

The Eurozone are our main customers. If they go down or are in financial difficulties then they can not buy anything. If we don't have customers to buy our stuff then our own industry suffers or goes bust too.

So it's more of a supplier / customer relationship that is causing the threat.

Plus many of our banks are owed money by Eurozone countries. Again if they have no money, then they can't pay the loans off and our banks suffer too.

It's all a house of cards! Pull one away and the rest are at risk of toppling over.

[ralphrj]

As you state if the Euro weakens against the Pound then our Exports will become more expensive.

IIRC 40-50% of UK exports go to the Eurozone so an unfavourable exchange rate movement can impact our economy.

In addition if the problems in the Eurozone drag their economies into recession then there will be a fall in demand for UK products (as the economy shrinks).

Put these 2 together and you can see how it will impact here.

[Crusoe]

Or the German plans for all the european nations including the uk to divide up any hit to the euro nations if one fails.
http://www.telegraph.co.uk/finance/financialcrisis...

[AJI]

ralphrj said:

As you state if the Euro weakens against the Pound then our Exports will become more expensive.

IIRC 40-50% of UK exports go to the Eurozone so an unfavourable exchange rate movement can impact our economy.

In addition if the problems in the Eurozone drag their economies into recession then there will be a fall in demand for UK products (as the economy shrinks).

Put these 2 together and you can see how it will impact here.

But on this front doesn't the Bank of England just manipulate our pound value by doing Quantative Easing?
ie. print more money for the home market AND bring down the value relative to other currncies?
(a 'win win' situation?)

[ewenm]

AJI said:

But on this front doesn't the Bank of England just manipulate our pound value by doing Quantative Easing?
ie. print more money for the home market AND bring down the value relative to other currncies?
(a 'win win' situation?)

QE tends to fuel inflation though.

[AJI]

steveatesh said:

The Eurozone are our main customers. If they go down or are in financial difficulties then they can not buy anything. If we don't have customers to buy our stuff then our own industry suffers or goes bust too.

So it's more of a supplier / customer relationship that is causing the threat.

Plus many of our banks are owed money by Eurozone countries. Again if they have no money, then they can't pay the loans off and our banks suffer too.

It's all a house of cards! Pull one away and the rest are at risk of toppling over.

But I was thinking that the type of exports that we do in the UK are not 'luxury' like expensive cars etc. that the Germans mainly export. I was thinking that our exports are more of the 'needed' for manufacturing and things like financial etc.
Therefore our 'customers' will always be there.
(I can see this is probably where my line of thinking falls apart, but it would be good to get other's opions).