Calamos Supports Greece
GreekReporter.comCanadaGreece's Crisis May Have Indirect Impact on Canada

Greece’s Crisis May Have Indirect Impact on Canada

Economists say that while Canada’s direct exposure to Greece and other peripheral European countries facing grave debt issues is minimal, the indirect impact could be significant.

In the summer, the Bank of Canada calculated that the direct claims of Canadian banks on Greek, Irish, Portuguese and Spanish banks, corporations and governments was only 0.3 per cent of total assets.

The fear, said Bank of Montreal economist Douglas Porter, is that allowing Greece to fail is the equivalent of opening up Pandora’s box, letting the evils of the world’s financial system fly free.

“Basically we are dealing with something that is unprecedented. We’ve had defaults before (Russia, Argentina), but not of an industrialized economy and not one in a major currency area.”

Irrational behaviour can take over, agreed TD Bank chief economist Craig Alexander. This week’s referendum shock rippled to Italy, which saw its cost of borrowing rise to above six per cent, nearing levels where interest payments on its 1.6-trillion-euro national debt are no longer sustainable.

That could mean Italy, too, will soon fall into the kind of economic death spiral that Greece now finds itself in. Similar fates could also befall Portugal, Spain, and Ireland as financial markets impose strict borrowing checks on those countries.

“If the European leadership cannot manage the restructuring of Greek debt in an orderly way, there will be fears others countries could follow the same path and that increases the cost of borrowing for those countries,” Alexander explained. “It becomes a self-fulfilling prophecy.”

“Greece is important … but in the bigger scheme of things, it’s not that important,” he said, pointing out its economy represents a mere 1.5 per cent of the eurozone total.

See all the latest news from Greece and the world at Contact our newsroom to report an update or send your story, photos and videos. Follow GR on Google News and subscribe here to our daily email!

Related Posts