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OUR THOUGHTS ARE WITH RESIDENTS OF GREECE AT THIS DIFFICULT TIME

The Greek economy has been in a state of depression for years already.

Now people are standing in line for hours to withdraw the maximum daily allowed amount of €60 euros from ATMs, and mothers are stocking up on medicine and baby formula.

Greece has defaulted on its International Monetary Fund debt and is therefore (technically) also in default to the European Central Bank and the European Commission.

And it will get worse before it gets better. On Sunday, the people will vote in a referendum about whether or not to accept the additional austerity measures demanded of them, and the German Chancellor Angela Merkel has said there will be no negotiations in the meantime. Market commentators are raising their estimates of the likelihood of Greece exiting the Euro above 50%.

No bones about it, it’s a difficult time to be a resident of Greece and our hearts go out to its citizens.

From the point of view of Australian investors and superannuation balances, though, the impact should be limited.

The Governor of Australia’s Reserve Bank describes our exposure as “miniscule”. The entire Eurozone now only represents around 4.5% of our exports (with only 0.5% in total to the more troubled countries of  Portugal, Italy, Ireland, Greece and Spain).

In addition, the major European economies and banking sectors are thought to be stronger than they were during the European credit crisis of 2010-2012 and the European Central Bank is regarded as having demonstrated the will and capacity to act.

So what should Australian superannuation and other investors expect?

  • Short term volatility. Markets dislike uncertainty.
  • Continued low rates. At least 30 central banks around the world have eased monetary policy this year, led by the European Central Bank’s embrace of quantitative easing, and Greek turmoil will maintain the downward pressure (except, possibly, in the United States).
  • Business as usual for the Australian economy in the medium term – our fortunes are much, much more closely tied to China’s economy than Europe’s.

…in other words, business as usual for Australian investors. Some investors, in fact, will see any further short term weakness as an opportunity to invest more.

What are your thoughts?

Do you think Greece will exit the Euro? Are you concerned European turmoil may affect your superannuation? Is there anything else you’d like to know about investments or superannuation?

Join the conversation — leave a comment below and let us know what you’re thoughts are.

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7 Responses

  1. Vincent Tan Reply

    This article is most useful to me as it provides me with an overview of the world economic scenario and how it is tracking; it’s impact on the Australian economy in the short & medium term.

  2. alf healing Reply

    Many Greeks dont pay tax others don’t pay their fare share of tax, they get pensions at such an early age, and high payment pensions at that, they refuse to adjust about this, why should the rest of the world help them to keep doing the same??

    • Walter Munro Reply

      Successive Governments have clearly mismanaged state finances. Sadly though, it is those with the least power and influence who seem to be bearing the brunt of the pain.

  3. John Bottos Reply

    It’s really sad. I’m the son of ethnic migrants that migrated to Australia over 40years ago from Greece and it’s totally heartbreaking. I do believe the decision to join the Eurozone was one that Greece really needed to consider, the Euro dollar as a currency was way too strong for such a weak economy such as Greece’s to cope with from the start. I often call family in Greece and the general consensus is nobody wants to leave the Eurozone but that might necessarily be the right line of thinking, personally I believe Greece needs to go back to basics and start all over again and this means possible leaving the Eurozone and going back to the Drachma. let’s face it, when Greece had the Drachma as a currency the countries growth in general was at 4.7% and now with the euro dollar it is at around 2% and if that. Unfortunately only time will tell, either way my heart goes out to all of the citizens of Greece and I hope whatever decision they make that it is the right one!

  4. Anonymous Reply

    The Greek government has had sufficient time repay ty huge debt
    The corrupt Greek government should pay up or otherwise it will take a generation or more to start o see any benefit

  5. Craig Beasy Reply

    Greece should certainly exit the Eurozone & become sovereign in its own right. It should approach Russia to request admittance to the group of nations who basicallY a cooperative, working together under the umbrella of BRICS for extremely long term separate national sovereignty sustainability, with national infrastructure & scientific innovative very long-term projects that provide generational employment & overall improvement in the standard of living.

    I’m not implying that greek people are a lazy lot, I’ve worked beside & for many an Australian of greek heritage, both 1st migrant/subsequent generations & their work ethic is to be greatly respected & emulated.

    But Greece’s general populace has long been duped into a decades-long mindset of non-payment of national debt & the long lunch & afternoon nap by grossly & inherently corrupt IMF boffins whose not so hidden agenda is to deliberately destroy national sovereignty & subjugate all to serfdom, precisely like during the Middle Ages era & only a select privileged few have rights to luxurious debaucherous lifestyles.

    Craig.

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