WATCH: Unlike the 2008 financial collapse in the U.S., which caught nearly everyone by surprise, regulators across Europe have had plenty of time to prepare for this. Canada’s finance minister said European authorities have measures in place to contain any negative consequences. Eric Sorensen reports on the global impact of a potential collapse.
The streets of Greece today show a brilliant picture of a country that is now a shadow of a once-powerful ancient empire.
The Greek economy, long rife with corruption and overloaded with debt, is in shambles — again.
Anxious Greeks lined sidewalks outside bank machines over the weekend, waiting to get what money they could out of their bank accounts, knowing the country would not meet a debt repayment deadline.
And as the sun set on Monday, the last day before a crucial debt deadline, thousands of people took part in an anti-austerity demonstration outside the parliament building — a familiar sight in protest-prone Greece.
A referendum on whether to accept the terms of an air proposal could tantamount to a vote to leave the eurozone, if a “no” vote wins.
Greece may not be a key trading partner with Canada, but that doesn’t mean Canadians shouldn’t be concerned about what’s happening in the Mediterranean nation.
From your stocks to your trip to the grocery store, here’s how the Greek economic crisis may affect you.
How could your stock portfolio be affected by the Greek crisis?
The Toronto Stock Exchange (TSX) fell 318 points on Monday, but that doesn’t mean stock market instability will be on a downward spiral as Greece continues to stumble.
“Investors hate uncertainty and what the Greeks have introduced is another layer of uncertainty, by having the referendum and then recommending that people actually vote “no,” said Glen Hodgson, Chief Economist and Senior Vice President of the Conference Board of Canada. “That’s kind of a double-whammy.”
He said the uncertainty is likely to continue, as the world waits for the results of the July 5 referendum and to see if there’s a “contagion effect” that would see other indebted European nations consider a similar move.
But, Hodgson said the best advice for investors is to “sit, watch and gather more information.”
Selling while the market dips is never a good option and “the real value of most stocks isn’t being affected.”
In fact, it this situation could work to some investors’ advantage.
“Frankly, it may become a buy opportunity for some investors if they have a risk appetite,” Hodgson said.
How about at the grocery store? Should you hoard your feta and olives?
There’s no need to run out to the supermarket to stock your fridge with your favourite Greek delights just yet. But if Greek banks stay shuttered for too long, it could spell trouble for the country’s food producers.
“It’s impossible for local manufacturers in Greece to operate without access to funds,” Alexander Alexakis, Vice President of Canadian Operations for Greek food importer Krinos Foods, told Global News. But, the company is used to Greece’s economic woes.
But if food production is affected for too long, it will take longer to replenish that stockpile. Alexakis said it takes about four weeks for products to make it from Greece to Canada.
Travellers be warned: Get your Euros before you go
Like trying to get blood from a stone, if you’re heading there on vacation this week you’re chances of getting cash from a Greek bank machine are slim.
According to The Guardian, the daily 60-euro (CDN $83.50) limit on withdrawals from ATMs only applies to Greek bank customers. That said, it’s not highly likely you’re going to find many bank machines that still have cash in them.
The Greek government has ordered banks to remain closed until July 6.
If you’re heading to Greece, exchange cash ahead of time and be sure to get it in smaller denominations: a cash shortage may mean a lack of change at restaurants and shops.
Some places may also be looking to stock up on cash and, as the Wall Street Journal reported Monday, many places have stopped taking credit card payments, meaning having hard-to-find cash in hand may be essential.
One piece of good news is that one of Greece’s prime tourist spots, the Acropolis, will be accepting admission payment with credit cards for the first time.
According to the Canadian government, some 180,000 Canadians visit Greece each year.
Should you be concerned about how this could affect the Canadian economy?
Not quite as much as you might think, according to economist Douglas Porter.
Although there was a drop at the TSX on Monday along with other world markets, he noted there wasn’t any significant decline in the value of the loonie.
But Porter, the chief economist at BMO Capital Markets, said the trickle-down effect Canadians might feel from Greece’s economic upheaval and a possible “messy divorce from Europe, if Greece fails to agree to terms of an IMF-European Central Bank aid proposal, would come in the form of our interest rates remaining low.
That may be a good thing if you’re paying a mortgage or looking to buy a home, but experts have warned in the past that lower interest rates lead to higher debt.
With files from Kieron O’Dea