Impact of the Greek Debt Crisis on Global Economy
The Greek economy is struggling with severe unemployment, major sovereign debt crisis and a GDP growth rate that is next to nil. Over the last few years Greece has been on a verge of economic debt default but the government has been pulled back from the precipice of sovereign debt default by bailouts from Europe. Every time the country is nearing default the global economy becomes slightly volatile till the deal has been struck between Greece, its creditors and European leaders for the bailout. The current crisis is regarding the third bailout to avoid debt default by Greek government on its debt. The following are some facts on how this crisis has impacted the Global Economy:
Impact of the Greek Debt Crisis on the World
• Over the last few days the fears of a Greek exit from the European Union made the Euro very volatile for some time now. When the referendum to reject the bailout terms happened in Greece, markets all over the world reacted in a very negative way to this news.
• If Greece was to default on its loans, creditors from all over the world do not get their money. Most of Greek debt is held by governments and central banks all over the world but some debt is still held by private investors.
• If Greece does not agree to the new terms of bailout it will default on its loans. This will be the largest default in history and it will be difficult for ECB, IMF and Europe not to mention the rest of the world to handle this default.
• There is a fear that the financial markets all over the world will tank in the short term if Greece defaults on more than 380 Billion dollars in debt.
• If Greece leaves the European Union, the Euro becomes very vulnerable. This means that other countries in the Eurozone that are also suffering from debt crisis like Spain, Italy and Portugal will also look for an exit which will put the entire common currency of Europe in question and also put the idea of European single market into question.
• Greece is part of NATO. Russia is trying to increase its influence over Europe for the last few years. If Greece defaults and exits Europe it goes closer to Russia. This is a major strategic loss for Europe and U.S. Also another problem is that because of crisis in the Middle East, Greece is taking in a lot of refugees which is another geo-political point to consider.
A solution to the Greek Debt Crisis and avoidance of Greece’s exit from European Union is important for the world today.