The crisis in Greece has shook the entire world. No doubt you may tend to think how the crisis in faraway Greece is going to affect me and my business, since you may have little exposure to the crisis, and sometime ignorance may prove to be bliss. However, instead of living in a fool’s paradise, it is important to know how the financial meltdown in Greece can affect your business in faraway America.
The first thing that is going to get affected are the contracts. The Greek government entered into a contract by promising to maintain reserves and a stable budget. However, the Greek government broke those promises by overspending. Consequently, the Greek government was bailed out by its European partners not once, but many times. Each time the government promised austerity, but failed to do so. Ultimately, Greece defaulted on its debt.
But how does that affect me as a small business owner in America? It makes you remind that contracts are never guaranteed. Even contracts made with governments or between governments. And imagine how the scenario would be of the contracts made with your customers, suppliers or partners. Debts are never guaranteed either. People, for whatever reasons, sometimes don’t pay their bills. Even governments do that. You can protest this and go to the court. But that doesn’t mean you will get paid. At the end, you need to understand that when you are buying and selling to a person, a company or a government, there will be some element of trust that you need to make to make sure you are secure.
Another reason your business may be affected by this crisis has to do with debt. Government debt. You need to consider the fact that the Greek government’s debt was over 150% of its GDP. They were in high debt. It is now that they are unable to service that debt and still pay its bills. Back home, our GDP most recently was about $17 trillion and our debt will be $19 trillion in 2016. We continue to have deficits in our budget to the tune of $500 billion a year.
The Congressional Budget Office warns us of enormous unfunded retirement and health care obligations in the years to come and many economists are predicting that American debt will reach Greek levels in the next 20 year if things are left unchecked. Currently we are able to service this debt, mostly by borrowing more money. But what happens when our creditors hit their limit, like Greece’s creditors?
What happens if and when interest rates rise and demand a larger share of our strained Federal budget? What happens when the same austerity measures are needed here in America just like in Greece? And the workers don’t get paid. On top of that, nobody will have the capacity to spend. How will that affect your business? Demand for your products will get drastically reduced. Your business could face much higher taxes. What will you do then?
Today we sit back in comfort and observe from the sidelines the chaos that is affecting the Greek economy. We have seen contracts broken, debt commitments not honored and the effects of government spending left unchecked. Yes, today we may be sitting on the sidelines, but tomorrow, if things are left unchecked, we have to do away with our business, healthcare and social security. Tomorrow, we may be players in the same game.