Greek Default Less of a Threat to Canada

Greece default makes them German's lazy cousin

Greece is becoming that annoying relative that just won’t go away. You know the cousin that comes to stay for a few weeks until they “get on their feet.” But months later you’re still waiting for the bathroom in the morning because they’re in the shower.

Greece is Germany’s Destitute Cousin

German Chancellor Angela Merkel must have real patience to wait day after day to see if all the efforts to help her poor cousin Greece will pay off.  Will Greece go on to be a valuable member of society and start paying back Merkel and the rest of her European  partners for everything they have done? Or, will she remain the European Union’s basket case that still lives in their proverbial basement waiting to move out on their own?

To sidestep default, Germany announced  Greece will be given yet another bailout. Greece has been taking loans since May 2010 simply to survive and this only adds to its total debt burden. After Greece negotiated the biggest sovereign debt restructuring in history this week, the Standard & Poor’s ratings agency has downgraded Greece’s credit rating to “selective default,” that’s two steps away from default.

Greece is essentially bankrupt and is relying on loans and taking more drastic austerity measures just to keep its head above water. The world is worried because a Greek default could mean the same volatility ride on the financial markets that we experienced in 2008 and 2009, and nobody wants to get back on that roller caster.

So what does this mean for Canada?

Broadly speaking, a Greek default will have less affect on Canada’s economy now than it would three years ago. In some ways Canada was been saved by the E.U.’s decision to prolong the default pain.

Longer term Canada may find it more difficult to trade with E.U. nations but the government is doing everything it can to reduce its exposure to Europe. Most recently Prime Minister Stephen Harper was in China on a mission to sell more Canadian oil. Harper has also embarked on similar trade mission to South and Central America, to sell Canada’s goods and resources. He’s doing what we all should be doing, minimizing our exposure to the E.U.

Five things Canadians should be doing in reaction to the latest Greece bailout

  1. Don’t invest heavily in companies with strong ties to Europe.
  2. If you have any Euro currency sell them for Canadian dollars.
  3. Remember it’s the system not the people behind the country’s debt problems.
  4. Learn from Greece’s mistakes, cut your own expenses, learn to live below your means and deal with debt immediately.
  5. Planning a holiday? Visit Greece.  they need your money more than ever before and you will probably be able to stay there at a fraction of the price.

Its not that we shouldn’t care about what’s happening in Greece but things have changed in Canada. The steps the government has taken to diversify it self away from the problems that plague Europe could be the best protection we need when Greece finally falls apart.

Wake up Europe!

Going back to the analogy of the annoying cousin taking up to much time in the bathroom, the Greek situation needs to be dealt with soon, otherwise the consequence will reverberate across the E.U. It could mean a new world order as Europe struggles to catch up and Asian, South and North American countries forge new trade relations. Ms. Merkel, its time to ask your freeloading cousin to get out.

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