Greece in Crisis – A Global Catastrophe?
Will there be a “Grexit” or won’t there? Some commentators are suggesting it is irrelevant and we shouldn’t care. How can we feel the impact down here in New Zealand?
Well, we are already starting to see the impact as other currencies gain against the Euro which has already had a direct impact on the Kiwi dollar. The Kiwi is down against the pound (down to 42 cents) and the US dollar (down to 65 cents) which will have a direct impact on export cost. While the Kiwi is making small gains against the Euro, the Aussie dollar and the yen, other currencies are growing stronger a little quicker. That situation is also likely to get worse if Greece stays in the Eurozone.
It seems crazy when countries around the world have prepared for Greece exiting the Euro that the European leaders seem determined to keep Greece in. Perhaps, the current European leaders should learn from their own history. After all, it’s not like Greece hasn’t defaulted before.
A quick visit to google will tell you that modern Greece has defaulted five times in the last 200 years. It’s been in default for roughly half of that time. Its last default was in 1932 and it remained in default until the 60’s. It’s comical when you consider that Ancient Greece actually invented finance as we know it. Unfortunately, they also seem to have invented the financial crisis too.
To keep Greece in the Eurozone and allow it to drag down the rest of Europe (which will further mess with our Kiwi dollar) seems crazy but that appears to be exactly what might happen.
Greece defaulted on its loans from the IMF at the start of the month. Its loans from the ECB are running out with the deadline of Monday 28th July. Allowing a “Grexit” would force the country to adopt its own currency as it, literally, will run out of Euros. Austerity measures would automatically happen. Wages and pensions would drop, credit would be hard to come by and people would be forced to work harder. Greece might even find its feet. You never know, they might try implementing some tax reforms to reduce the horrendous tax evasion problem that they currently have. But I’m not holding my breath.
