It’s hard, I suppose, to watch the TV news and get too excited about events “over there” — with “there” being that place far, far away from wherever you are. Indeed, we here in Colorado find it challenging to link events in China or Australia with events in our own corner of the world. And we face this challenge with the full knowledge that the world is flatter (à la Thomas Friedman), smaller and more connected than ever. Which means, of course, that events in China and Australia or — to put a finer point on it, Greece — really are important to us North Americans (and vice versa) whether we like it or not.
Greeks are rioting in the streets, fighting European Union-imposed austerity measures, and trying (but at this writing, failing) to organize a new government. They feel bullied by the EU and are perilously close to defaulting on their debt. This potential Greek tragedy has attracted much attention in the last few months, with not-so-solvent Spain, Portugal, Ireland and Italy watching nervously in the wings. The rest of us are just glad we’re not in the Euro Zone and wishing the Greeks best of luck getting out of the pickle they’re in.
Would that the debt contagion were so confined. The analogy I’ve heard suggests that the challenges Greece faces are more Titanic-like: The ship (global currency stability) has hit the iceberg and is taking on water below decks, but no one top side (most of us included) knows it yet.
If, in fact, the Greeks throw off the yoke of austerity measures — higher taxes, reduced government spending, reduced personal income and, frankly, many years of hardship, in exchange for an EU bailout and eventual stability and economic health — the alternative is that Greece leaves the EU altogether, ditches the euro as a currency, goes back to a drachma-like currency, suffers a credit crunch and massive deflation followed by inflation ... and who knows what else.
And once Greece leaves the euro, how likely are Spain and Portugal and Ireland and Italy to follow? And if they leave, where does that leave the euro? Is this the beginning of the end of the euro? And if it is, what does that do to the European economy? What does that do to China, which holds so many euros? And how is the North American market affected? How is the composites industry affected?
We may not know specifically what the effects would be, but it’s safe to assume they would be primarily bad — the interconnectedness of global currencies guarantees that a shock wave in the euro will hit the dollar and the yen and the renminbi with equal indifference. On top of that, the tenuous state of the global and U.S. economies make them highly susceptible to such shocks. And just for fun, you can throw in the uncertainty introduced by the election in France, which brought the non-austere Francois Hollande to power and leaves Germany’s Angela Merkel alone as the euro’s only hardliner.
What to do? We always have hope, which in this case means we’re left wishing for the least bad outcome. We hope that the Greeks soon elect a competent, organized government. We hope that if that government decides to bail on the EU, it does so with organization and thought that minimizes the injury felt by the rest of the world. And we hope that other countries in the Greek boat don’t follow suit.
It’s a lot to ask.