Does Greece Matter? Does it affect you?
If you are Greek the answer is a resounding yes, it matters, and my best wishes go to you, the politicians in a number of countries and over a long period of time have made poor choices. That said mostly they were democratically elected Greek politicians.
If you’re not Greek how does it affect you? If you have booked a holiday to Greece you might expect some disruption. Having the banks closed for a protracted period will make life more and more difficult. You should expect to take Euros in cash, and be really careful to look after them, desperation might lead more people to crime. But I just can’t see lawlessness breaking out on a Greek island.
Things are not so very bad. We need to remember that Greece has a really small economy, about 8% of the UK, and is really not that closely connected to the UK. The Germans could pay for every Greek pensioner if they chose to. The Greek problem is a known unknown, all the people who are affected should have prepared contingency plans years ago. I believe the contingency plans are robust. The media are sensationalising it, yes really.
So why does is matter at all?
It matters because Italy and other nearby countries are closely connected to Greece, the Italians owe plenty to their own creditors and having their loans to Greece go bad is unhelpful but not catastrophic.
It matters because the Euro is supposed to be irrevocable. If Greece leaves it is no longer irrevocable, indeed the mere fact that Greek exit is being discussed shows it is not irrevocable. If Greece leaves who next when the going gets tough? Portugal, Spain, Italy even France? Financial markets have a habit of picking up on sloppy thinking and weakness and might test the Euro to its limits in the years ahead. Greece’s problems highlight what many people think are the problem with the Euro:
- The Euro is monetary union.
- You can’t have monetary union without fiscal union – shared tax revenues
- You can’t have monetary union without political union – on the basis of no taxation without representation if taxes are Europe wide politics need to be.
In my opinion these weaknesses are fundamental in nature and eventually without full union (which I don’t believe the people of Europe want) the Euro will collapse. Timeframe? I think within 30 years!
Does the Greek crisis matter? Yes. Is it going to affect what you have for dinner next week? No, not unless you are Greek.