Euro-crisis threat to holidays in the sun?

First the good news. The pound in your pocket is now worth more against the euro than at any time since 2008. This means more spending power when you reach your destination.

Not so long ago, a pound was worth little more than a euro. Today a pound will buy you more than 1.2 euros.

For the British, Greece is one of the top ten holiday destinations (1.9 million people went there in 2011), but should people planning to go there in 2012 be concerned about the country’s economic problems?

On 17 June, the Greeks vote in elections that could see “anti-austerity” parties tighten their grip on parliament. The biggest of these parties, Syriza, is opposed to the terms of the austerity package drawn up by the EU and IMF in return for bailout money to keep the Greek state functioning.

If this bailout tap is turned off, Greece could find itself out of the euro, with a knock-on effect in other heavily indebted countries like Spain and Italy, which are even more popular with British sun seekers (respectively 10.5 million and 2.3 million travellers last year).

While Greece is reliant on cash from the EU and IMF, Spain and Italy borrow money on the international markets, and their costs remain high because of investors’ concerns about their financial viability.

In Spain it is the health of banks that is spooking the markets, with analysts speculating that Madrid could be forced to seek a bailout, which would have implications for the entire eurozone.

Vulnerable

In short, the single currency is looking vulnerable. If Greece exits, the rest of the eurozone might be able to contain the damage. But some economists believe that if one country leaves, the whole project could come to an end.

So where does this leave British holidaymakers? What would happen if you were abroad when the worst happened?

The Association of British Travel Agents (ABTA) believes that if Greece falls out of the single currency, it is likely there would be a transition period during which travellers would be able to contnue to use their euros. It dismisses speculation that euro notes printed in Greece would become worthless overnight.

Cash

But ABTA advises holidaymakers that they should not rely on their plastic cards and would be wise to take plenty of cash with them. This is because of the possibility that they could find it difficult to use credit and debit cards at Greek banks.

The organisation told Channel 4 News that protection was available to travellers to Greece, but only if there were concerns about their safety. If the Foreign Office were to advise against travel to Greece, an “extremely unlikely” scenario according to ABTA, customers on package holidays would have three options: go somewhere else, defer their date of travel or have a full refund.

Assuming the Foreign Office did not raise safety concerns, customers would be liable for cancellation fees if they decided they no longer wanted to go to Greece.

ABTA said package holidays offered greater protection than independently-organised flights and accommodation and travellers should consider this option if they were worried.

Thomson/First Choice, Britain’s biggest package tour operator to Greece, told Channel 4 News it had received a “minimal” number of inquiries from people who had booked holidays to Greece, but sales had not been affected and it was not issuing any specific warnings.

‘Significant disruption’

Foreign currency expert Neil Record, who runs Record Currency Management, told Channel 4 News that a Greek euro exit would in the short term mean “significant disruption to normal commercial operations, like holiday arrangements”. But over the longer term, Greece would continue to be an attractive holiday destination. “Given the planning cycle of most summer holidays, this is really going to kick in next year, not this, if Greece leaves the euro,” Mr Record said.

There has never been a better time to come to our country, Association of Greek Tourism Enterprises

As far as the Association of Greek Tourism Enterprises (SETE) is concerned, it is “business as usual”.

Andreas Andreadis, president of SETE, says: “We want to encourage international tourism and assure potential tourists that there has never been a better time to come to our country. We are trying to change the way our country and its economy is run, however, this is not going to affect the quality of a holiday.

“Greece remains one of the top destinations in the world and we reassure holidaymakers that this summer remains business as usual.”

Is SETE being too optimistic? Best to consult veteran travel writer Simon Calder, who proudly announces on his website that he is looking forward to a holiday to Greece this summer and has already bought his euros.

Precautions

But he took precautions, buying more euros than usual because of the possible threat to electronic banking, and insisting on low-denomination notes.

He believes that if Greece leaves the single currency, travellers would still be able to pay in euros, but would receive change in new money (most likely a euro note with D for drachma printed on it).

Because of immediate devaluation outside the euro, of perhaps 40 per cent, Simon Calder’s concern is that if he pays for a 15 euro round of drinks with a 50 euro note, he could receive change in the new currency worth just 20 euros. That is why he believes 50 euro notes are a bad bet.

He offers the same advice for holidays to Portugal, Spain, Italy and Cyprus.

For seasoned travellers like Simon Calder, a euro break-up during the summer holidays would be manageable. ABTA believes so too. But if you are of a nervous disposition and are not prepared to take any risks, you might look elsewhere for your holiday location.