Source: ANGELOS TZORTZINIS / Getty
Unless you’ve been living under a rock for the past few weeks, you’ve probably noticed there’s been a lot of news coverage on the debt crisis in Greece. Even if following the economy isn’t your thing, you should really be aware of how Greece’s financial problems could impact us as American individuals.
“[Few] of us are looking at what’s going on in the world,” Dr. Julianne Malveaux, founder of Economic Education said. “Because we’re not looking at it, we see what’s happening in Greece and we think, ‘this doesn’t have anything to do with us’…[I]t does because we live in a global economy.”
“We see what’s happening in Greece and we think, ‘this doesn’t have anything to do with us’…[I]t does because we live in a global economy.”
How Greece’s Economic Problems Impact Us
There are four big reasons why you should be following what’s happening in Greece: the most obvious reason would be your stock portfolio if you’re invested in European countries.
“If you have too much stock in international mutual funds you may want to switch it out or switch some of it out,” explains Malveaux. “I would say that in a general European portfolio that’s mostly invested in the euro…you might lose 5 to 10 percent…”
The second most obvious reason here is how it might affect your travel plans. If you’re looking for the best bang for your buck on your next vacation, Europe would probably be a good idea since the euro’s strength has been fluctuating amid the debt crisis. Now the exchange is at $1.11 but in March, the conversion hit a 12-year low ($1.05) and Greece is still leaving businesses open for tourists. However, it’s up to you on whether you think Greece in particular would be much fun at this point. The financial turmoil has prompted tension and protests among residents. Furthermore, the US Embassy issued a security statement as a warning for visitors.
Thirdly, our 401(k)s could take a hit. Since markets are dropping around the world, our market in America that has been rising and encouraging people to buy for the past six years could come to a halt. The concern isn’t very deep yet, as we’ve regained ground throughout the problems raised by Greece relatively quickly. Still, we could be in danger if debt issues spread to other countries like Portugal and Italy.
Finally, mortgage rates have been low since the Great Recession, but the US central bank could raise rates by September. That might not happen because government officials might not want to risk fluctuating the market again, especially if Greece is still in economic ruin and impacting other countries. More than that, raising rates could impact the strength of the dollar which would then limit US exports.
The Latest News Coming Out Of Greece
The latest that has happened in Greece amid its economic crisis is that leaders are now asking for 53.5 billion euros (59 billion USD) as part of a three-year bailout package from the Eurozone bailout fund. The proposal is filled with austerity measures like pension cuts and hikes in corporate taxes, taxes on luxury items, processed foods, health services, transportation, hotels and restaurants. Parliament has expressed support so far and officials may come to a deal before their Sunday deadline. As a result, the summit that was originally planned for this weekend to decide if Greece will stay in the Eurozone may be cancelled.
Source: LOUISA GOULIAMAKI / Getty
With Parliament’s support, Greek leaders have been cheesing hard for the camera, saying that they’re optimistic about being able to reach a deal with the country’s creditors. But critics have come down on Prime Minister Alexis Tsipras and his team for putting forward a proposal that is highly similar to the last proposal that was previously presented by the creditors and that is much less generous than what was offered to the people of Greece in the past.
