By Sean Bailey
With their no-vote on Sunday, Greece has set into motion a series of events that the world economy has never seen before. The European Union has always been an idealistic and precarious congress of nations, built on ideas of multinational currency and governance. Indeed, many news stories in the media circus surrounding this referendum have referred to “the European idea”, as if countries sharing a common currency was simply a twinkle in the eye of ambitious politicians.
In his piece, published earlier this week, Noah Donnenberg made a prediction that, given Greece’s talks with Putin, that Russia would offer a helping hand to Greece after its catastrophic exit from the Eurozone. Greece, a major customer of Russia’s energy sector, would occupy a position similar to that of Crimea, although replacing physical annexation with “economic annexation”. It will become, according to Noah, “a kind of neo-colonial relationship” with Russia holding czar-like control over Greece in the next step of Putin’s expansionist agenda.
Drew Cunningham disputed Noah’s prediction, and threw in some of his own for good measure. However, Drew, in pointing out that Greece would be an economic burden on Russia, failed to take into account Crimea, which is expected to cost Putin’s government trillions of rubles. Putin seemed remarkably unconcerned about his economy, and Greece is arguably much more of a power play than even Crimea would be. Putin appears to be ruling with his ego, at least where annexation is concerned.
Drew presents his own theory in response to Noah’s. He believes that China will use Greece as an economic wedge to expand their trade relations with Europe, and points to China’s purchasing of Greek IOUs as evidence they are the gentleman caller to Greece’s damaged damsel of an economy. This would make sense, as China (unlike Russia) has been interested in increasing their interaction with the Western countries and their economies, and have instituted numerous policies, like the Special Economic Zones, to hasten the influx of foreign money in their coffers. China would certainly have the available cash and stability to assist Greece financially, with much more ambivalence from the global community as opposed to Russia.
The Global Markets
Although there were minor shakeups in the global stock markets, fear of the default spreading to other economies, and the requisite risks, are low. The momentary shifts in stock prices are not expected to have any long-term effects. India, throughout the entire world economy, is in a uniquely good position to weather any economic storm: it has over $355 billion in forex reserves, effectively providing insulation from any economic shocks caused by the Greek crisis.
No matter what happens, this unprecedented vote has shaken confidence in what some consider the largest social, political, but most of all economic experiment: the Eurozone. Its supposed permanence will either be affirmed, or, most likely, torn down by Greece’s unique economic situation. Whether Greece seeks respite from Russia or China, whether the Eurozone is left unblemished, and whatever the final result of this crisis, rest assured it will have long-lasting and far-reaching consequences for what is truly a worldwide economy and a global society.
If you liked this article, don’t despair! Check out the two other posts in this three-part series about Greece, the Eurozone, and the world economy for more content just like this. And be sure to share these articles on social media if you liked them!
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