25% International people in the UAE worried about their savings back home

What are expat views on collapse of the euro?

Are expats living in the UAE concerned about euro collapse? Aimed to find out until what extent the European currency’s struggles concern the internationals based win the United Arab Estates, Expat Forum has run a poll in conjunction with Barclays Wealth and Investment Management.

Despite numerous attempts to try and prop up the ailing euro it seems future problems are still in the offing and the issue is far from over. Opinion is still divided as to whether the euro will survive or collapse and our online poll at the expat forum offers a very interesting insight into the views and opinions of expats living in the United Arab Emirates.

Before we go into detail about the answers given by expats living in the UAE it is worth reminding ourselves about the sequence of events over the last few years which brought the country to prominence.

The United Arab Emirates itself is dominated by Dubai even though it is not the largest or most powerful emirate of the group of seven. Dubai most certainly came to the attention of many investors with the property boom which began just after the turn of the century. This led to billions upon billions of dollars being invested into the area which many saw as an open door to other more prominent economies in the region. The rush to gain exposure to Dubai created a massive influx of overseas investment which led to significant commercial developments and a requirement for overseas workers.

Even when the U.S.-led worldwide recession hit home back in 2007/8 many were still adamant that Dubai was in many ways insulated from the worldwide economy and would not be affected. However, once overseas investors began to repatriate their funds this led to a significant reduction in demand and eventually a domino effect which hit home when neighbouring emirates were called on to bailout Dubai. While the massive influx of expats to the region very quickly trickled back to their former homelands there are still many living and working in the area today.

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We received some interesting answers to the online poll when asking the question, are expats in the United Arab Emirates worried about the euro collapsing?

No, it would never happen (25%)

We have split down the various answers given to those from different countries in order to try and obtain any difference in opinion between expats in different areas of the world. The average throughout the whole poll was 34.84% although for some reason expats living in the United Arab Emirates are a little more sceptical about the future of the euro. It is very difficult ascertain the opinion and advice given by the local media in countries around the world, in relation to European problems, because in many ways it is easy to deflect local concern and put forward the European issue as more of a problem than their own internal challenges.

However, it is also interesting to note that despite the relative collapse of the Dubai economy for example there is still significant overseas investment in the region. This will include expats and business people who will have moved from Europe to take up the challenges of Dubai and perhaps they may have a better angle than the local community about the real problems within Europe. Unfortunately, there is still real concern about the future of the euro and indeed many expats are questioning themselves and their futures in their newfound homeland.

The easiest decision to take with regards to your view on the euro is that it will “never happen” because historically very few currencies collapse out of sight. However, the euro is still a relatively young currency and the challenges of bringing the whole of Europe together under one economic banner is a lot tougher than many experts had predicted. There is concern over hidden debts on country balance sheets and there are even accusations that the Greek government was coerced into pushing some of its debt “off-balance sheet”. Whether or not these accusations are correct or not remains to be seen but the truth is that Greece in particular is still in a dire situation and the likes of Spain, Portugal and Ireland are not yet out of the woods.

So, if we step back and take a balanced view of the euro then perhaps those out with the area, i.e. those in foreign lands, may well have a better perception than those living within Europe or having strong connections with the region?

Yes, it would affect my savings back home (25%)

The joint top most popular comment with regards to the future of the euro would suggest that there are still a significant number of European expats living and working in the region. There is an argument to suggest that the vast majority of those who moved to the region for employment opportunities have fled back home already but in reality the Dubai economy may well be down but it is certainly not out.

There seems to be above average concern regarding the effect that the collapse in the euro would have on savings “back home” which brings into play exchange rates and ongoing concerns about the currency. There is no doubt that the Greek debt debacle has had a major impact upon the strength of the euro as a whole and indeed the strength of Europe as well. This opinion poll is certainly giving the impression that the vast majority of those who moved from Europe to pastures new had been content to retain their assets and their income in euros. Was this a mistake?

The whole subject of transferring your assets from one currency to another as and when you leave to set up home in a new country is a can of worms. While it is relatively easy to sell one asset and transfer the proceeds into any given currency this is not always as simple if you have pension arrangements, investments or other income denominated in euros. Much of this income may well become available further down the line which means that to all intents and purposes you’re at the beck and call of the European currency exchange rate and over the last few years this has certainly been to the detriment of those living in pastures new. Should you be looking towards protecting your assets and your income going forward?

No, I use a FX tool of any kind to make the most of currency volatility (10.71%)

In years gone by when expats looked to move to pastures new to begin a new life many of them would simply liquidate their assets and transfer what was available into their new currency. Continuous income such as pension arrangements or investment arrangements were very much at the beck and call of the foreign exchange markets and indeed with relatively little volatility in historic currency markets the risks were nowhere near as high as they are today. However, the introduction of the Internet has brought about more information and more opportunity to “play the markets” although many people miss the opportunity to “protect” their assets.

It would appear from the online survey that expats in the United Arab Emirates are a little more up to date with foreign exchange tools and are looking to make use of volatile markets. Is it ironic that some people seem prepared to take risks with their future assets and future income when in reality they left their former homelands for a reason, to begin a new life? There is serious concern that those taking risks with foreign exchange tools, which are readily available across-the-board, are playing with fire and they may well reduce their purchasing power and financial strength going forward. Surely a more interesting opportunity with regards to foreign exchange tools would be to introduce a form of insurance to your assets?

The various foreign exchange tools available today can not only be used to speculate on the currency markets and the future direction of currencies such as the euro, but they can also be used to protect existing assets and existing income. If you think of them as a form of insurance policy then you will begin to get the idea and the potential benefits for the future. Even if you introduce a form of insurance policy to your investments and your income, via foreign exchange tools, and the much rumoured demise of the euro does not occur, what have you really lost? For a relatively small amount of money you are giving yourself peace of mind, reduced your downside and allowed yourself to look forward to the future. Do not underestimate the power of insuring your assets and your income as opposed to outright speculation on what are often volatile markets.

If you’re looking to use such investment tools then we strongly recommend taking professional financial advice because the information available to the general public is very different to that available to the major investment houses of today. For those looking to use foreign exchange tools, why not take a step back and think the situation through to ensure that you are doing the right thing because you could literally be playing with fire and playing with your future.

Yes, it would affect my purchasing power (25%)

The joint top answer in our online poll at the expat forum will probably surprise few people because fluctuations in the currency markets will have a major impact upon income denominated in a non-local currency. Despite the fact that the rest of the worldwide economy is still struggling, in relative terms, there is no doubt that the European economy is in a more difficult place and the future is more shrouded in uncertainty.

As we touched on above, the impact upon an expat’s purchasing power in the United Arab Emirates would only emerge if they had assets, savings or income in another currency. Pension arrangements and benefit arrangements from your former homelands can sometimes be difficult to translate into a new currency in their entirety because they are very often long-term arrangements. Therefore many expats living in the United Arab Emirates will have to live with some degree of exposure to the euro for the rest of their time in the country. This can be difficult to live with and difficult to contemplate in such traumatic markets as we are experiencing today but in reality there is very little you can do in the short term.

With regards to affecting the purchasing power of local funds in local currencies it is worth looking at how the potential collapse of the euro would impact upon the worldwide financial markets. While those with assets, income and savings denominated in non-euro currencies may feel safe and secure from any potential demise, this is certainly not the case. European banks are amongst the strongest in the world and London is the largest stock exchange in the world bar none. Any impact upon the European markets from the demise of the euro would certainly lead to another credit crunch and problems all over the world. How this would impact local prices and local purchasing power is debatable but in reality the worldwide financial markets would come to a standstill and credit would only be available to a limited few.

Rightly or wrongly the European Union positioned the euro as one of the major currencies of the world and while many people were happy to benefit from a strong euro, these are the same people who will suffer if the Euro collapses. Can the worldwide community afford to see the euro collapse?

Other answers (14.29%)

As well as the four answers we have covered above there were a number of other comments regarding a potential collapse in the euro and the thoughts of expats living in the United Arab Emirates. These include: –

“No, it would force the New Zealand dollar even lower” perfectly illustrates the impact which the euro collapse would have upon currency markets around the world. In reality while many people may be concerned about the impact on their local currency nobody has any idea how difficult the situation could become. The European trading market is an integral part of the worldwide trading market, both in terms of imports and exports, therefore, as we suggested above, no country and no currency in the world would be untouched by a collapse.

“Yes, there may be a future collapse”: It seems as though not only are expats from Europe concerned about the potential collapse of the euro but there is genuine concern from other nationalities. The United Arab Emirates has in the past depended heavily upon overseas investment, much of which came from Europe. In the event of a collapse of the currency this investment would literally disappear overnight and even more funds would be repatriated. The knock-on effect around the world would be catastrophic!

The future of the United Arab Emirates economy

While the economy of the region is dominated by Dubai and the rise and fall of the economy over the last few years it is easy to forget there are more Emirates than just Dubai. Despite the fact that the Dubai was put forward as one of the more powerful regions in the UAE it did need the assistance of fellow Emirates to bailout its financial system. Many experts believe that the leaders of Dubai went about cultivating economic growth “on the hoof” and were unprepared for future shocks.

When the economy turned down the leaders of Dubai were left with enormous debts and guarantees they had given to the various entities were also called into play. There is no doubt that lessons have been learned over the last few years but those who have written off Dubai as a busted flush may well have to eat their words in the future. Investors may not be as keen to rush in where fools tread in the future but there is no doubt that the original potential seen in Dubai is still there. As a consequence, the number of European expats moving to the region may well have been impacted by the economic outlook but it is still a very attractive proposition for many looking for a new life.

The United Arab Emirates attracted more than its fair share of skilled workers from Europe when the economy went into boom time and investment flooded in from all corners of the globe. While there is no doubt that some expats did repatriate their funds and their lives back to Europe there are many who still remain there. As a consequence, the ongoing problems within Europe have done and will continue to have an impact upon the everyday life of many people still living in Dubai and other areas of the UAE.

It is interesting to see a difference of opinion with regards to the future of the euro and the potential for a collapse in the short to medium term. Whether this is influenced by local media as opposed to attention grabbing headlines in Europe, which have no doubt had an impact upon local confidence in the euro, is a matter for debate. If you asked 10 experts today about the future of the euro you would likely receive 10 very different answers and 10 very different scenarios. The reality is that we have never been in this situation before and hopefully the doomsday scenario which some are predicting will not materialise!