Mountains, stretching coastlines and sloping valleys have characterized Greece since its people began developing the very foundation of culture, society, learning, art and history itself.
But Greece has found itself in one of the deepest valleys of its storied history. After forsaking its drachma for the stability of one united currency, the euro, Greece can’t pay back the money it owes.
The eurozone is an example of what good can come from global business and also the risks it carries.
“One of the most important things to understand is that it will impact me and my daily life,” said Assistant Professor Dr. Michelle Reina of the Department of Management, Entrepreneurship and Marketing. “Just going to shop in the grocery store, where your car is made or where your clothes come from – that’s international business. It only makes you a better consumer, a better citizen and a better employee if you understand these things.”
The dream of the European Union and one united country stretches back to the 19th century. After isolationist national politics helped lead to two world wars, much of Europe was ready to unite and depend on each other’s strengths.
And no country has proved stronger in the last 50 years than Germany.
The tight-fisted Germans are a fiscal conservative dream. They work hard and are well paid for it.
Their economy is the lifeblood of Europe, and while countries with weaker currencies wobbled in instability, the German mark was as strong as the beer it purchased in the 20th century.
The French and the Germans led the way in creating the euro, backed by a central bank would allow for each of the individual countries to create a support network for each other while building a larger, more powerful, economy.
This was a risky move for strong countries, as they would have to expose their economics to other nations.
Diverse culture and history has always kept the European nations separate. No country epitomized national pride better than France, but even that notion saw the benefit of a financially united Europe.
“Everyone was so willing to receive the benefits of the euro, but not the risks,” Reina said. “For a country like Greece, it was almost a no brainer to have a currency backed by such a strong country as Germany. The debate in Greece wasn’t about financial implications, but if they could abandon their drachma as it was the longest in use currency in history.”
But the dream became a nightmare in 2008, when bubble after bubble built by cheap loans and low interest rates throughout the world popped.
Eurozone member Greece found itself unable to pay off its debt. Some major French banks had extended the loans to Greece. The banks were backed by U.S. money market funds, a problem for America.
“Last summer some believed that if the Greeks failed, it could bring down French banks which could bring down the short term credit market in the U.S.,” said Assistant Professor Larry Locke of the Department of Management, Entrepreneurship and Marketing. “One market that you do not allow to freeze up and fail is the short term credit market. That’s how companies fund their payroll and their day-to-day actives.”
Because the situation has been so slow to develop, money markets have had plenty of time to protect themselves from a Greek default. Still, the Greek debt must be addressed
The current crisis is not only about Greece. Several countries that joined the eurozone are now in financial hot water.
“Germany is such a powerful economy. The Germans and the French can underwrite the Greeks. But they can’t pay out the Italians, the Spanish and the Portuguese. They can’t carry all of Western Europe, and, even if they could, they wouldn’t. If you tell the hardworking Germans they have to pay for the Italians and the Greeks who they probably view as good-for-nothings, they will turn over the whole government,” Locke said.
Still, by joining the eurozone, each country agreed to be dependent on each other, yet the Germans or the Central Bank can’t work alone. Each government has to work together for it to be successful.
National politicians are trying to work with the centralized European authorities while still focuing on appeasing voters. The contrasting cultures that make up the eurozone have created a region of one currency and hundreds of diverse opinions.
“You have local citizens, and you have to understand this from their perspective. Their government is supposed to enact all these austerity measures. Prices are going to go up, and people are going to be laid off. No one wants to make those decisions,” Reina said. “The politicians want to keep their jobs, but the people are upset by these changes and they won’t reelect you. (Politicians) have to do this, but the people on the street don’t understand.”
College of Business Dean Dr. James King said, “And if you are a German citizen, you don’t care so much what happens on the streets in Greece.You just don’t want your system to fail.”
Reina said, “The people are so protective of their culture, and the Germans are so adamant about how things must be run. You cannot extricate the financial systems from the cultures they are supporting, but the cultures don’t support the interconnectedness.”
The interconnectedness is no longer voluntary and not just for the countries who signed up for the euro in 1999.
“Foreign banks account for about 20 percent of all commercial and industrial lending in the United States,” said Chair of the Department of Accounting, Economics and Finance Dr. Paul Stock. “As the European Central Bank deals with their financial crisis, the foreign banks are tightening credit standards in the United States. That means it will become harder for U.S. businesses to obtain loans from foreign banks. Also, economists predict that if the financial crisis in Europe worsens, it will have a negative effect on the U.S. gross domestic product of about 1 percent per year.”
King insists that, as the global community continues to grow together, citizens must be informed about what is happening around them.
“This is bigger than just international business students,” he said. “You have to be in touch every single day. Here we need to prepare students to be learners all the time so they can adapt to the market and know what to do. You have to be adaptable all the time.”