Confused about what’s going on with Greece? You’re not alone. “It’s currently one of the most complicated subjects in the world,” says global equity strategist Alec Young of Standard & Poor’s Capital IQ.
Here’s a quick tutorial:
- What’s the problem?
Greece owes billions to European banks, the International Monetary Fund, and others. Without assistance, Greece runs the risk of default; i.e. the country wouldn’t be able to pay back what it owes.
- Why should we care?
If Greece goes down, its lenders, which include foreign banks, will suffer as well. U.S. banks don’t have much direct exposure to Greece, but they do have exposure to the countries that hold Greek debt, like Germany and France.
Greece also isn’t the only European country struggling with severe debt—Italy is, too, among others. Many people fear a domino effect, if Greece goes bankrupt.
- Can Greece be fixed?
Hard to say. There is a bailout plan on the table, but the Greeks have yet to agree to the terms. It would require more cutbacks throughout the country.
If the bailout is not accepted, the alternative is grim: Greece could default and/or exit from the euro altogether, which would have worldwide repercussions. Fasten your seatbelts: This Greek tragedy is nowhere near the last act.
Pour some ouzo. Has the situation in Greece changed your investment strategy?