Followed by the third round of bailout of €86 billion from European Commission, the European Central Bank and the International Monetary Fund (IMF) in July, Greek now remains temporarily silent under the huge wave of refugees in Europe.
At this very moment, after several tough decisions made to keep both Greece’s position in Euro and its resigned Prime Minister Alexi Tsipras, the world is looking forward to see whether Greece can settled the biggest debt crisis in European history.
Interestingly, one country’s opinion was especially focused by leaders and press on this issue, China. One question has been discussed since the very beginning of the Greek’s debt story, dose China need to do something on Greece’s debt crisis? What can this rich guy do to help?
Well, the answer is, no. China don’t need to help it and China can’t help with it.
If Greece messes up this time, no big effect will be caused to the world.
Greece lied by exaggerating its ability of making money to get into Eurozone. No wonder later it turned out that this country is totally unable to pay for its debts. Three turns of bailout and reformation didn’t end up the crisis, but it did prove solidly that Greece just doesn’t honor other countries’ help. Moreover, Greece is a tiny economy, it takes up around 5% of Eurozone’s GDP and only 0.5-1% of the global GDP. Even Hong Kong’s declining economy ranked higher than Greece’s in 2014’s GDP per capital analyses. The unpaid Greek debts would not crash down rich German and the EU. The reason why European countries kept lending money to make Greece staying in Eurozone is because they’re afraid of the instability it might cause to the Euro and EU. Also, let Greece backs to its former currency, Drachma, which has been abandoned since 2002, can do no help but to cut out Greece’s only rope left with Europe economy and let the Drachma depreciates into paper trash.
Besides that, China can do nothing to help Greece on this issue.
Unlike Argentina in late 90s, Greece doesn’t have adequate natural resources to pay the debts without giving money. Although Greece’s tourism industry, which growing to 20% of the nation’s GDP recent years, is attacking more and more customers these year under the depreciation of euro, the improvement space can be quiet limit if people still can’t take out cash from Athens’ ATM due to capital controls. In that case, the chance for Greece to go out of the crisis by its own economic growth is rather small. Only by political reformation, labor force expansion and taxes reduction can the country find its way out. Yet no real move has been seen since Greece accepted EU’s third bailout exchange conditions include extend shop opening hours and delay the retire age. Greek people used to live with high pensions, now it’s time for them to start work or nobody can save their country.
As a country far out of Eurozone, what Greek crisis can cause to China is too small to be worried about. China better not steps into EU’s backyard and invests on somebody who cannot pay back. Making diplomatic statements expressing the optimism on Greece’s recovery and sending more thousands of tourists will be just fine.
CNBC financial journalist talked about Greek debt crisis’ background story: