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Sliding Euro a mixed blessing for Russians

With euro at four-year low, Russian tourists looking to the skies

Anna Sulimina  May 25, 2010

The Euro fell to a four-year low against the dollar last week and with a summer in the doldrums looking increasingly likely, Russia’s tourists are looking to the skies while exporters are stuck with that sinking feeling.

Amidst worries about Greek debt and concerns that Spain, Portugal and the UK are all ready to introduce austerity measures to their economies, the currency fell to 1.2202 against the dollar and 37.4454 to the rouble on May 18.

Despite fighting back by 3 per cent during the week and a proposed $1 trillion security package, experts have been raising questions about the existence of the Euro and even the European Union.

Russians meanwhile – having their own too-recent experience with currency default in 1998 – are ready to seize on the opportunity of a tottering Euro, particularly for bargain basement holidays.

Effect on tourism

“The main positive outcome of a weak euro will be on tourism – Russian tourists will go to Europe for less,” said Vladimir Bragin, a strategist at Trust Bank. “And importers of expensive European goods will also gain from the situation, since their purchasing price will go down. The question is whether this will reach the customer.”

Tour operators agree that Russians are showing more interest in going to Europe due to the sliding Euro.

“In April we saw an increase in European destinations and now, with the falling Euro, we see it to be more and more popular,” said Maya Lomidze, executive manager of Ator, a Russian travel agencies association.

Greece, which faced a 12 per cent slide in earnings from tourism in 2009, is now becoming more and more popular with Russians due to prices falling by 20-30 per cent and offers to tempt the tourist in.

“This summer one will be able to spend two weeks in a 3-star Greek hotel for just 800-900 Euros,” said Lomidze. “Greece, Spain, Italy and other European countries have more special offers than usual and will be more affordable.”

Going Greek

Strikes and demonstrations in Greek cities, which led to around 3,000 cancellations from Europeans per day, have not put off Russian holidaymakers, who appear committed to a good low-price holiday despite the unrest.

After more strife last week and strikes of state officials, air and railway traffic controllers, which caused flights to Greece to be grounded, things have gone back to normal, the operators say.

“There were some accidents when tourists couldn’t get to the Acropolis because of its workers going on strike, but now Greek tourism workers have agreed to cause no inconvenience,” said Lomidze. “There is absolutely no risk visiting Greece this summer.”

According to the Russian Tour Business Union, the exodus to Greece has increased by 35 per cent this summer, with some 300,000 Russians expected to descend on
the country this year.

But aside from a summer jolly up, many businesses are not as enthusiastic about the prospects of a plummeting Euro.

Capital flight

“The weak Euro may cause flight of capital from Russia and have a bad effect on our car producers and manufacturing,” said Yaroslav Lissovolik, chief economist at Deutsche Bank in Moscow.

The problems in the EU are not positive for Russian exporters either, since Europe is the biggest export market for this country, analysts agree.
“Domestic companies will definitely lose but it could be good for European producers willing to expand on our local market.” said Vladimir Osakovsky, head of strategic planning and development at UniCredit Bank.

Car producers are likely to be one of the hardest hit, said Bragin, of Trust Bank, as domestic brands have already been well overtaken by foreign brands.

“The more the Euro falls, the harder it will be for Russian goods to compete with imported ones, and this regards the auto industry most of all,” said Bragin. “Exporters may lose out as well, though I wouldn’t worry about oil and gas as their well-being depends on the global market situation more than exchange rates.”
Some exporters, such as Russian Standard, which has started marketing heavily across Europe, are not too worried about the currency fluctuations but further falls could see profits downed.

“We have a high volume of exports to Europe but it is managed by our distributors, and we will get our due income anyway,” said Oleg Egorov, the company’s representative in Moscow. “But of course, it may be hard if the Euro currency rate hits the bottom.”

With euro at four-year low, Russian tourists looking to the skies
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