I don’t want to belong to any club –Marx (Groucho): or Does Greece Really Matter?

UK-based mining analyst, David Hargreaves, publishes a weekly subscription newsletter – Week in Mining – aimed primarily at U.K. resource investors but incorporating always pithy comment that should be of interest to resource investors worldwide.  Here follows the introduction to his latest such in which he puts the Greek/EU economic imbroglio, following Alex Tsipras’ Syriza party victory in the recent elections there, into some perspective.  To request a copy of the full letter and/or receive a 4 week free trial subscription click on this link: http://weekinmining.com/free-trial-subscription/    

Does Greece matter? If so, to whom?

So this highly indebted, badly run little land has voted-in a far left wing government on what appear to be unsustainable promises. It is an upset which, if we read the popular press, threatens world economic stability.

Really? Here sits Greece:

Greece and the World Economy

World EU USA China India Japan Greece
GDP ($Billions) 98,056 18,005 17,993 17,019 6,451 4,995 351
% Total 100 18.2 18.2 17.2 6.5 5.1 0.4
Population (Millions) 7,100 435 310 1,330 1,150 130 11
% Total 100 7.0 4.4 18.7 18.2 1.8 0.15

So here we have 0.15% of the world’s population generating 0.4% of its GDP, shaking the apples off the trees and threatening to topple the largest single economic bloc. This puts David and Goliath into perspective.

Now why such an impact? We think it has something to do with this: There are 27 EU member states. It is not a federation, nor yet a free trade organisation. It has its own flag, national anthem and currency and a sort-of common foreign and security policy, but all a bit wishy-washy. It bails out ailing members on an annual accounting basis, but has only two regular putters-in financially. You guessed it, Germany and the UK. Most of the others are net takers-out and some of the more powerful members e.g. France, Spain, Italy, are becoming increasingly so.

Strict rules are imposed on those who rattle the begging bowl too loudly and that is Greece right now. It has dragged €240 billion out of the EU charity fund in the past five years and has little to show for it. Not only could it not repay but now says, under its new government, it won’t, except on its own terms. Now this is no way to talk to your bank manager is it?

So we are convincing ourselves that this could not only rock the EU boat, but cause it to hit the rocks.

Suddenly, almost 20% of the world’s economic clout looks shaky. All because 2% of its collateral is suspect.

Is this a club to which you would like to belong?

As Groucho concluded: I don’t want to belong to any club that will accept me as a member.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s