June 30 marked the end of the financial year in Australia, and while the restaurants down-under were booked out to celebrate a healthy year of growth, on the other side of the world Greece was defaulting on its debt. In simple terms, Greece owes more than 300 billion Euros (roughly A$450 billion) to various creditors such as the International Money Fund. It announced that it could not process the last payment that was due. Yet another bail out has been offered—perhaps the last?

Let’s go back five years. Greece, in the Euro zone since 2001, faced financial difficulty and struggled after the impact of the global financial crisis of 2008. To minimise the impact on Europe, the Eurozone members, jointly with the IMF, agreed to loan money to Greece. In 2011, Greece requested more funds and in the meantime undertook a strict policy of austerity to continue servicing its debt, leading the government to freeze wages, increase taxes and extend the required retirement contributions. In January this year, the people of Greece—exhausted and stifled by expanding poverty—decided to vote for the anti-austerity party Syriza. Alexis Tsipras became their prime minister, promising his people an increase in salaries and to put the country back on track. He was popular in Greece, but European leaders were less impressed. It became clear that promising the world to the Greeks meant that Europe was unlikely to see its money again…and this fear became a reality three weeks ago.

European countries are tied together because of reciprocal interests. Recent events have been a poker game between the main European creditors and Greece—will Greece be able to one day pay its debts, or should the creditors write them off? Plus the tough question of whether or not Europe should keep Greece in the Eurozone, as it has become a massive burden on the European community. A crisis summit was held in Brussels to decide whether Greece should remain part of the Eurozone. After more than 15 hours of negotiations, the European leaders decided it could stay if it increased its policy of austerity.

But there is no guarantee that Europe will continue to be that accommodating. So what would be the potential global consequences of a “Grexit”? Greece would have to return to the Drachma with a very low exchange rate. That would strengthen the Euro, favouring Greek exports but spiking Greek inflation. The financial markets would likely react negatively in Europe, influencing the other major stock exchanges.

In Australia, the superannuation funds are increasingly diversifying their European share portfolios. A Grexit could impact the financial market on this side of the world. However, for the trade relationship between Australia and Greece, the impact would only be minor as the exchanges represent less than $200 million—not even 0.05% of the Greek debt. And let’s not forget that the Greek economy is smaller than the Victorian economy, so even if this may spell disaster for the Greeks, Australian businesses are likely to suffer little impact.

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Written By Thibault Gindre

After more than seven years of Dynamics NAV technical experience in both France and Australia, Thibault joined Fenwick Software in July 2014. Prior to joining Fenwick Software Thibault was involved in developing and implementing NAV for clients as diversified as car importers or wealth management entities. Thibault has been involved in a number of implementations at Fenwick including a large implementation of the NAV waste management add-on, enwis).

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