The doom and gloom predictions about what might happen if Greece, Spain or both quit the euro continue.
This time it's the turn of Greece's largest commercial bank, the National Bank of Greece. It thinks "an exit from the euro would cause a significant drop in the living standards of Greek citizens with a reduction of at least 55% in per capita income". At the same time, Turkey's finance minister thinks it would destroy confidence in non-EU markets.
Yet while an exit would undoubtedly be painful, and very disruptive in the short term, we're not convinced that it's the worst thing that could happen. In the longer run it'd be better for the Greeks.
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A smaller eurozone might have other benefits too. As Sam Weihagen, the new chief executive of tour operator Thomas Cook has said, the return of the drachma "could be very profitable" for the tourist industry.
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Is he right? And if so, are there any shares you can buy to take advantage?
The crisis is making holidays in southern Europe even more expensive
The problem with Greece and Spain (not to mention Portugal and Italy) is that prices and wages are too high relative to those across the rest of Europe. However, euro membership makes it impossible to cut real wages through devaluation and inflation. Instead, firms have to try to cut wages directly.
This is called an "internal devaluation" and it's a very painful and slow process. In the short and medium term, firms are forced to reduce output, or even to shut down. This in turn leads to the brutal recessions and the high unemployment that we see in much of Europe.
This is why, despite the economic crisis, Greek and Spanish holidays aren't getting any cheaper. Some resorts have even put up their prices, hoping to recoup their losses from less price-sensitive travellers. A Post Office survey in May also found that food and drink prices on the Costa del Sol have gone up by 35%, compared with last year, while those in Corfu have increased by 10%.
Unsurprisingly, this has had an impact on visitor numbers. According to the Greek central bank, visits from the country's two main tourist markets, Germany and Britain, in the first quarter of this year, were both down, while visits from Russian tourists fell by over 40%. Overall, total tourist numbers fell by 12.8%, and revenue dropped by 15.1%.
Bookings for summer holidays made early this year were also sharply lower. As a result, Nikos Magginas of the National Bank of Greece aniticpates "a difficult year for the tourism sector". He doesn't foresee things steadying until much later in the summer, and things could get a lot worse.
If austerity provokes civil disorder in Greece or Spain, a scenario that is not at all hard to imagine, numbers could end up falling further. Already Veratour, a large Italian operator, has suspended payments for rooms that it booked with several Greek hotels, citing a number of reasons, including "governmental instability".
So what if Greece and Spain leave the euro?
If Greece and Spain leave the euro and restore their national currencies, it will make holidays in those countries much cheaper. That's because the new drachma and new peseta would fall sharply against pretty much every other major currency. Meanwhile, the value of a slimmed-down euro would be likely to rise, encouraging German tourists.
At the same time, the resulting increase in inflation in these countries would make it much easier to cut real wages to the point where Greek and Spanish workers become competitive once again. This would boost demand and enable the tourist sector to start making money again.
The most straightforward way to benefit from this would be to invest in budget airlines. These would profit from an increase in tourist numbers, without any of the operational risks associated with tying large sums of money up in the two countries.
Two airlines that look attractive on this basis are easyJet (LSE: EZJ) and Ryanair (LSE: RYA). We've tippedboth in the past. Both firms have good strong financials, with returns on equity of 16.5% and 17.9% respectively. My colleague Tim Bennett also covers easyJet in more detail in the current issue of MoneyWeek magazine.
A far more risky but potentially more rewarding - approach would be to buy tour and hotel operators with direct exposure to Spain or Greece. Two that look interesting are the Greek airline Aegean Airlines (Athens: AEGN) and the Spanish hotel company Melia Hotels International (Madrid: MEL). Both have done badly, falling by 40% and 57% respectively in the last year. However, Aegean has more cash than debt, while both trade well below the value of their net assets. Analysts are bullish on both stocks.
Of course, it goes without saying that you should only invest in the latter two companies if you are happy to endure a large amount of volatility, and only with money that you can afford to lose. But if you're looking for potentially profitable plays on the current chaos, they're worth further investigation.
