The cash exodus from southern Europe is creating problems for Gibraltar. As investors, worrying about the stability of the euro, take their investments to “secure” (dollar and sterling) locations, there are fears that the amount of money fleeing the eurozone will accelerate.
The investment landscape is changing as investors prioritise security over high returns; this comes as good and bad news for Gibraltar. It’s true that some investors are moving money out of the euro area, but others are simply looking for a cash haven and Gibraltar has enjoyed a large influx of cash from investors looking for a secure environment within the euro area.
Why Gibraltar? Well, like Cyprus, it has certain qualities which make it very attractive to the investor. For one thing, Gibraltarians speak Spanish and English which makes it logistically easier for foreign-language investors (particularly South American companies looking for a way into the European Union) to conduct business in the area. For another, investors can bank in sterling or euro. Gibraltar has established itself as an offshore finance centre to be reckoned with.
The Gibraltarian economy is plugged into the UK banking system; it is classed as a British overseas dependent territory. This basically means that it shares a close political and constitutional relationship with Britain, and that it shares Britain’s credit rating. For investors, this means that there is no difference at all when they bank in Gibraltar as to when they bank in the UK (except that Gibraltar offers a series of tax advantages).
Gibraltar’s biggest threat comes from Spain. This year, the “Spanic” has caused investors (both local and foreign) to take their investments out of Spanish funds, and to redirect them to “safe” zones elsewhere.
In the FINAL PART of our eurozone report, we look at the next steps for the crisis, including:
- What is likely to happen over the next few years.
- How easily it can be managed.
- What the lasting impact of the crisis will be.