The Greek Tragedy and its Impact on the world: Problems with Greece

The news has been making rounds across the globe - Greece is in major financial trouble. It is a well known fact now. However, there are certain questions which often keep wondering in the minds of common people. Let's analyse those questions in this article:

Problems with Greece Economy and what it means for the rest of the world

A look at Greece - its a small country, both in terms of population and area. It has a small economy and a history of bad debt. Its a part of the European Union. So, why is everyone in the world, including US as well as the entire European Union or EU, is doing all they can to prevent Greece from getting into this kind of trouble? What is the interest that these big countries like US and UK and the big unions like EU have, in small countries like Greece?
The answer to this question is interesting:
1) Impact on Currency: The problem of this is because of the common Euro currency. Anything happens to Greece economy, it will impact the Euro severly, since Euro is the common currency of EU which includes Greece.

2) Market Impact:Anything that goes wrong with one currency member, will impact the overall market. By overall market it means that all the regions & countries of the EU, which includes more than 25 countries, which all trade in Euros. It will send a negative signal about the overall European economy.

3) Dominion Effect: In case Greece economy goes down, there will be problems with other countries as well - Italy, Portugal, Spain, Ireland, are next in the list. Its the same case which happened last year with Lehman Brothers. After the collpase of financial giant, many other financial institutes which were counterparties for Lehman collpased. Imagine what can happen with an entire country's economy collapsing. To the worst case, how much impact will it have on the overall Euro currency which will impact the entire EU region.
The simplest way to explain this is with an example - If I offer you bonds by Greece Government now, will you buy them? Proabably not. Then, if you know that there are similar problems with anything issued in Euros, that too from countries like Spain, Italy, Ireland, etc., will you but the bonds issued by those countries, No. So the chain reaction will continue, leading to further collapse.

How are other countries impacted?
If you are thinking that problem lies only within Greece and the Euorpean Union, its wrong. When the world is becoing a global village, nothing can be spared or remain secluded. Imagine a countru like India, China, Brazil or so called emerging nations. If the investors from EU region see a problem in their homeland, they will start pulling out their invested funds from these emerging economies for their own use in their countries. That will mean more selling pressure, so more collapse in these emerging markets.
Then, dont forget that all the economic conditions impact the consumer behaviour. If a person in Greece or UK is not feeling financially secure, he will not spend lavishly. This will lead to reduction in demand, which might have a severe impact on the exports made to the EU region countries from markets like India and China.
So, overall, everything will get impacted across the globe