Weak euro draws holidaymakers

Tourists walk beside Greek presidental Evzoni guards as they descend from the Acropolis archaeological site in Athens. AFP

From a week on the piste to island-hopping in Greece, holidaymakers heading from the UAE to Europe this year are hoping to get more bang for their buck.

The crisis on the continent is heaping pressure on the Euro, which some economists say could fall a further 12 per cent against the dollar this year in the event of a Greek sovereign default.

The UAE dirham is pegged to the dollar, which means that it benefits from any weakness in currencies against the dollar.

So holidaymakers heading to Europe out of the UAE are likely to find their spending money going further. If the economic situation in Europe deteriorates further, "the euro will continue to fall and there will be bargains to be had", said Shane Mallon, the manager of Capricorn Travel in London.

"If the euro continues to weaken obviously then it becomes much more attractive to go to a euro-zone area if you're looking for a good-value holiday."

Europe in general is an attractive holiday destination for residents of the Emirates. Cities such as Paris, Frankfurt, Munich and London are among the most popular destinations for travellers from the region, according to Sunil D'Souza, the regional travel director at Kanoo Travel.

"The booking trend to Europe has increased," he said.

The euro was trading at US$1.25 on Friday compared to a high for the year of more than $1.34 reached in February.

The single currency is forecast to fall further to about $1.15 towards the end of the year, according to Bank of Tokyo-Mitsubishi. Meanwhile, Capital Economics expects the euro to tumble to $1.10 later this year.

Natixis is forecasting for the euro to weaken to $1.15 in the event of a Greek exit from the euro.

"Hopes have grown recently that policymakers will soon implement new measures to tackle the euro- zone's mounting crisis, but we still think that any response will probably be too little too late," said the latest report by Capital Economics.

"We still think that Greece might leave the euro zone by the end of the year, regardless of the election result."

Euro-zone industrial and labour market data to be released this week is only expected to "provide clearer signs that the euro-zone economic outlook is worsening", Capital Economics analysts said.

There is also growing speculation Spain will receive a bailout for its ailing banking sector. Al Ansari Exchange, one of the biggest providers of exchange services in the Emirates, is gearing up for a doubling in demand for cash exchange from dirhams into euros in the next few weeks.

"We are seeing a big surge in demand into euro and sterling as holidaymakers and expatriates get ready to go to Europe," said Mohammed Al Ansari, the chairman and managing director of the exchange.

The British pound has also weakened recently, trading at $1.55 on Friday compared with $1.62 in April.

A Greek exit from the euro zone could make it even better value for money according to Mr Mallon.

"I think you will see Greece becoming more popular," said Mr Mallon.

"Even if they stay in the euro, on the ground Greece is becoming cheaper.

"Goods and services in Greece are falling quite rapidly in terms of prices at the moment."

* additional reporting by Tom Arnold