The ancient country of Greece has a very rich and distinguished history in matters of philosophy, science and the arts. But, unfortunately, modern Greece is struggling with a poor and lackluster economy.
Prime Minister of Greece Alexis Tsipras and German Chancellor Angela Merkel met in Berlin last Monday (3/23) to try to reach some sort of agreement over Greece’s looming debt crisis, but initial reports indicated that the two leaders aren’t any closer to resolving the country’s financial woes.
This isn’t the first time Greece has faced an economic meltdown. If you remember, in 2012 the country received help from the European Union (EU) to the tune of a $272.5 billion (US) bailout program. That program expired on Feb. 28, leaving the rest of the world to ponder what’s next.
What Happens If…?
So far, the tension caused by the Greece debt crisis has had a boosting effect for gold, though perhaps not as strong as some investors might have hoped. Gold futures rose for four straight days the week of March 16-20 (ending with a 2.8% gain for the week), and prices are set to continue rising on the back of Athens’ ongoing tug-of-war with Europeans creditors.
During the 2012 bailout, gold prices dropped substantially as the U.S. dollar made serious gains on the weakened euro and investors turned to paper assets. Investors can likely expect something similar to take place if Greece gets another bailout.
However, if Greece decides to leave the Eurozone, there could major repercussions not just in Europe, but for the global economy at large. The EU, of which Greece plays a major role, accounts for one-fifth of global trade, says the Financial Post. As of 2013, the Greek economy was ranked 37th in the world for nominal GDP per capita and 40th for purchasing power.
Possible consequences of Greece leaving the Eurozone, or a “Grexit” as it’s being called, include:
- Francs, lira and deutsche marks could make a comeback.
- Major devaluation of the euro (if the currency doesn’t breakdown altogether), causing European investors to liquidate their euro-based assets en masse and flee to safer investments and/or foreign currencies.
- On top of the Russia-Ukraine conflict, the loss of Greece could put Europe in an economic slowdown that would have a damaging effect on global exports and world markets, such as energy.
If, on the other hand, European creditors reach an agreement with Greece and the looming Grexit is averted, many believe an entirely different set of consequences would likely ensue.
Politicians from other nations in the EU believe that if Greece stays with the euro, “it means more aid packages and the pyramid scheme continues” – that’s according to Finland’s populist opposition leader.
Opponents of another Greece bailout argue that keeping the bankrupt county in the EU will have unintended consequences, such as:
- Forcing other already burdened European economies – like Finland who is in the midst of a 3-year recession – to send aid packages and bailouts to Greece.
- Only temporarily “patching up” a broken Eurozone system.
- Providing cash assistance to Greece even though they haven’t fulfilled their promised economic reforms, which only weakens the political clout of the EU and sets up another bailout in the future.
As time runs short to end to the Greece debt crisis, Wall Street will surely be keeping a close eye on Athens and Berlin when deciding which commodities to buy and sell – gold, silver and other precious metals included.
What’s your take on the Greece debt crisis?
Start the conversation by leaving a comment below or on Facebook.
@Mike
Funny how you say in one sentence “The truth of the matter is that before the Euro, Greece was financially stable and a prosperous country” and in the next “Our country and economy were destroyed by the Germany in WWII…”.
Which one is it?
Greece never was “a properous country” in recent history. It has been Europe’s poor house for decades, limping from insolvency to insolvency with a “soft” currency that was constantly getting devalued even more than the Italian Lira.
Accession to the EU (and the Euro – which was only accomplished by grossly fudging and cooking the books) gave Greece a great opportunity to modernize its economy. This opportunity was squandered in a sea of government bureaucracy, inefficiency and corruption (typical all along for Greece).
Your comment (especially trying to blame German occupation over 3 generations ago) reflects the typical Greek attitude of trying blaming everyone else for their economic woes, except for themselves.
Whatever Greece has coming, they deserve it and have noone to blame but their own corrupt, inefficient and bureaucratic political system and society.
The Greece debacle may be a preliminary look on a small scale of what may transpire here in the states someday. The out of control spending and mindless entitlement obligations will ultimately be unavoidable and unhide-able will accounting magic and fed dollar creation. The scary behaviors of the masses with when people rushed to their banks to withdrawl all assets is a typical human response. Many forget how the Greek govt raided personal assets. I remember! I appreciate the low metals prices now! I am in collecting mode for the long term! Don’t keeep your metals in a bank safety deposit box. Nothing safe about that!
When Golden Dawn comes to power they will hang the Greek kleptocrats that caused this mess.
As a Greek, I can tell you that just like any other nation, the government has had its struggle with previous politicians, corruption, and mindless spending. The truth of the matter is that before the Euro, Greece was financially stable and a prosperous country. What the media in Western Europe tells the world is that Greece “has a problem” as if we are to blame for being set up to collapse by the IMF. The Euro concept should have just been that, a concept. Our country and economy were destroyed by the Germany in WWII and i’m glad to see that Greece is currently seeking war reparations. I believe that ultimately Greece will not exit the euro because it is the IMF’s biggest fear; And that comes at a price – Eliminating Greece’s bailout loan debt.
Happy Greek Independence day!