Greek is one of the countries with stable political circles. Its banking system is also stable compared to many other European countries. Nevertheless, this does not mean that it’s free from the looming economic crisis in Europe and elsewhere in the world. One of the reasons why the Greeks banking system is not greatly affected by the crisis is because it invested more in turkey Russia and Ukraine which have not been affected greatly but if these economies fail, things may change for the worse.
The buying capacity of the average consumer as well as the cash flow of many businesses in Greek have been shattered by the strategy of keeping deposit rates low and loans very expensive. This makes business in Greek very expensive and hard to maintain. Importers have problems paying for the goods. The country has a great financial deficit – in fact, the second-highest in Europe after Italy-of around 13.9 percent, and research shows that the figure is likely to move upwards. This crisis has attracted strikes from civil servants. Greek struggles to cope with a great debt of $406 billion and it still needs to borrow to meet the budget deficit. This affects the local consumers and investors and the greatest hit are the European countries that use the euro. This is because the great deficits will drag the euro currency down to zero. The question is, should the countries watch as this happens, or should Greek withdraw from using the euro, or should they come in to assist it? The latter is the only option as they cannot watch a country withdraw from this great means of bringing European integration and common governance.
With this kind of financial crisis, bank rates will be affected and mostly exaggerated. An exporter must therefore be very careful about the method of payment to be used. As an exporter using the documents against payment as a term of payment, I will have to get other better means. In This term of payment, the bank holds the documents of ownership of the machinery am exporting until the buyer of the machines pays for them. Eventually, the bank has to be paid by the exporter since the agreement is between the bank and the exporter.
Due to the financial crisis, where solvency is affected and the borrowing rates are very high, there is a possibility that the importer will not be able to pay, or will pay after a very long time. The bank which is also affected by the crisis will also exaggerate the cost of this operation and this leads to a loss on my side. This is because there is going to be what we call a ‘difficult market’ and so I have to be advised on the best terms of payment in such a financial crisis.
In this kind of crisis, the best term of payment is cash in advance. As an exporter, I will want to receive payment before I ship the machinery. This way I will be assured of getting the payment in time for continuity of my business. I will be avoiding the situation where machinery has been shipped, and payment is made to the bank after a very long time. What will happen if this is the money, I was supposed to use in making more machinery for export? Will I stop doing business just because there are financial crises in Greek? Never.