Israel and a Greek tragedy

Every banker is asking themselves how the knock-on effect of the demise of the Greek economy will impact on their own economy. For Israel, a 90 minute flight away, that same question is just as pertinent.

Let’s get one thing straight from the outset. The countries may share the Mediterranean sea and a love of humous. Spain and Portugal may not be far away either. But, as I wrote last week, the structure of Israel’s financial system is very different and much stronger.

That said, there are some early indications of a negative fall out. You only have to look at the shekel, which has appreciated 6-7% against the Euro and Sterling over the last 30 days. Bad news for local exporters.

Both amongst the manufacturers and exporters organisations, there is deep concernFinancial markets are on the defensive. And such a feeling of uncertainty is often reflected in people’s hesitation to buy goods and services. Potentially more bad news.

Israeli companies have several options. One is to explore new markets. At Expo 2010, Finance Minister, Steinitz, signed a wide ranging financial agreement with his Chinese counterpart. I have lost track of my friends who have made commercial trips to India over the last 12 months. Foreign Minister Lieberman was in Japan last week.

In contrast, the domestic market is not necessarily available to local manufacturers. It is often considered less profitable, where terms of credit are very stiff. Further, statistics released yesterday reveal that the consumer upsurge at the end of 2009 continued by only 1.6% in the first quarter of 2010.

Where to next? The stability of the Israel’s fiscal and monetary policy indicate that although the Mediterranean waters may be choppy, the long term should be a smooth sail.

Explore posts in the same categories: Business, Israel

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