Question: How are the continuing woes of Greece and European Union affecting the man on the street here in the UAE — both for local Emiratis and expatriates from Europe?

Answer: The $1 trillion bailout plan for European Union countries in danger of going bankrupt announced by the EU and the International Monetary Fund last week has received a mixed response from economic analysts around the world, who have expressed differing views on its practical effectiveness at reviving struggling economies.

However, the announcement of the rescue mechanism, which came ahead of the opening of the stock markets on Monday, had the intended effect of boosting global markets and halting a further downturn in the value of the euro, by sending a message to the world that any troubled country within the EU's borders would receive financial assistance.

However, in the past week this initial boost in confidence seems to have started to wear off.

The move came on the back of a sharp fall in global markets, including those in the UAE, at the end of April amid fears that the economic woes of Europe could trigger the second leg of a "double dip" recession — fears that drove up the cost of borrowing for other debt-ridden nations, such as Portugal and Spain.

Local viewpoint

From a local economic viewpoint, the region's credit spreads were hit by Greece, in line with wider emerging market credit, and there were concerns that spreads had tightened too much so a correction was needed.

The resolution of key issues in this region should help to remove some uncertainty and restore a degree of confidence among the investor base for Gulf credit.

For the man on the street in the UAE the situation will have a varied impact.

Expatriates from the euro zone who have property and investments in EU countries will heave a sigh of relief, if the move prevents any further devaluation in the euro and worsening of the economic crisis, as both these events would increase the chances of those investments turning sour.

As the UAE continues, at least for the time-being, to be tied to the US dollar, then the dirham remains equally stronger against the euro which has declined in the recent turmoil.

Euro-expatriates should consult their independent financial adviser to see if they can reduce any future potential hit on their euro zone investments.

It may be wise, for example, to try and re-mortgage to a longer fixed-term policy and to increase pension contributions in case of further devaluation of the euro.

Setting up an offshore account from which to run savings and pension schemes, outside the remit of Europe, should also be discussed if not already in place.

For those Euro-expatriates who regularly send remittances back to their home countries, the devaluation of the euro against the dirham has actually benefited them in the short term, as have businesses that buy in euros and sell in dirhams, and those from the Emirates who holiday in Europe.

For these people any strengthening of the euro on the back of the rescue package could have a negative impact on their immediate finances.

For the "ordinary" investor, some of the above points may make it difficult for them to know where to invest their money at the present moment.

There are many areas in which this may be done, including mutual funds and savings plans (both conventional and Sharia-compliant) which can often help to spread and minimise investment risks, especially over the longer term.

It is therefore important to consider what your aims are for future savings and investments, and you should consider consulting an independent financial adviser to assist you.

The writer is Chartered Insurance Broker and Sales Training Manager, Nexus Insurance Brokers LLC, Dubai. if you have any questions, please write to advice@gulfnews.com