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Global Finance

All eyes on Greece – but are we missing the bigger picture?

John Hewison
Founder and Director
27 Sep 2011

Over the past year world economic news and global financial markets have been dominated and concerned with the instability of the Greek debt crisis. The European Economic Union (EEU), the Central Bank, the International Monetary Fund (IMF) and the major banks in Europe have all pledged their support to help Greece achieve an orderly financial outcome. Yet despite this, there is little sign of resolution, with Greece unable to effectively comply with the financial measures it must take to satisfy demands for economic responsibility. 

With the world now intently watching every bit of economic news coming out of Greece, it’s time we regain perspective on its true global impact.
Based on 2010 GDP figures, Greece is ranked 32nd in the world with a GDP of US$305 billion. For comparison purposes, Australia is ranked 13th with a GDP of US$1.23 trillion, or around four times that of Greece. The EEU has a GDP of US$16.28 trillion with Greece contributing just 1.8%, while the US has a GDP of US$14.66 trillion. 
Contrary to what we read in the press, it seems in quantum terms, Greece is economically ‘irrelevant’ and a debt default, as unpleasant as that may be, would be unlikely to cause a major global disaster. Although, we can’t dismiss the fact that it is a member of the EEU which does it give it a little more weight. 
But this debt crisis is certainly not new. Greece has run economic deficits for the past ten years and when it entered the EEU in 2001 it already had a debt in excess of 100% of GDP. The situation has been gradually worsening over time, so why has there been so much fuss over the latest figures?
In the wake of the GFC, and the pressure placed upon the world economy to avoid such events happening again, debt has become an evil word, and rightly so. As a result of this pressure, the chickens have come home to roost for Greece, and they are being forced to introduce fiscal policies that deal with their problems, despite being politically unpopular. 
We are all responsible for our excesses whether an individual, business or country, and hard decisions often need to be made. Affirmative action by the Greek government will no doubt dissipate the short term influence on the rest of the world. 
Nonetheless, I find it astounding that such a small player on the world economic scale can cause so much disruption. Although it may take decades to resolve, Greece needs to instigate the hard, unpopular, but necessary, reforms that will enable them to pay their way and reach economic stability. 


Hewison Private Wealth is a Melbourne based independent financial planning firm. Our financial advisers are highly qualified wealth managers and specialise in self managed super funds (SMSF), financial planning, retirement planning advice and investment portfolio management. If you would like to speak to a financial adviser on how you can secure your financial future please contact us 03 8548 4800, email info@hewison.com.au or visit www.hewison.com.auPlease note: The advice provided above is general information only and individuals should seek specialised advice from a qualified financial advisor. The views in this blog are those of the individual and may not represent the general opinion of the firm. Please contact Hewison Private Wealth for more information.