How will the Greek Crisis Affect Sweden?

Greece has a lot of work to do over the weekend to be able to meet the European lenders' deadline on Sunday. I'm picturing a couple of litres of forehead sweat on the desks and floors of Greece's parliament building in the next couple of days, unless it's already been flooded. Since last weekend's street party when jubilant no-sayers danced on the streets of Athens, this week has been hair-raising. On Monday, Greece's finance minister Yanis Varoufakis announced his resignation, and following a minister meeting in the Eurozone, pressure on Greece has increased. A million questions have emerged this week: Are the European lenders about to loose their patience? Will Greece go for #GREXIT? And what does that even mean? Also, how will the current situation affect an EU-country such as Sweden, which isn't part of the Eurozone? As young Scandinavians, do we need to care at all? Since I can't stand anymore random speculations and conspiracy theories on the Ring P1 radio show, I called up Andreas Hatzigeorgiou. He's Chief Economist at the Stockholm Chamber of Commerce, which makes him an ideal expert when it comes to global finances and what effects they may have on the human race.

VICE: Hi Andreas. How does Greece's situation affect the world outside of the Eurozone?
Andreas Hatzigeorgiou: I'd say that the markets, both the European and global, are holding their breaths when it comes to the events in Greece. That's because it's a development that has the potential to affect the entire Eurozone. EU and the Eurozone is one of the world's largest economies. It's a huge part of the world's total export; it's a huge part of the world's total foreign investments. It's an economic world power that the rest of the world has an interest in.

I know that the Eurozone is very young, but has something that could be compared to what's going on right now happened in the past?
No. The Eurozone is too young. Also, Greece joined as late as in 2001. It's not one of the countries that were part of the formation of the European Monetary Union. Although their ambition was to join from the beginning, they didn't qualify to be part of the collaboration [at that point]. [The Eurozone] was a very young project when Greece joined in 2001. You could say that the Eurozone is in its teens and is currently facing major issues that all economic projects of this kind go through at one point. So, no, it hasn't happened before and this is the first time that the project is going through this much pressure.

So what, according to you, is the worst that could happen now?
The worst that can happen is that Greece will leave the euro. That's the opposite direction of a joint currency's main principle – which is that it's irreversible. And the idea of establishing the purpose of an irreversible currency is to not create a downward spiral or a self-fulfilling prophecy in which markets and others don't trust that the currency will be available tomorrow. If you start to doubt if the currency will exist tomorrow, things like what's happened in Greece will happen. People will withdraw their money from the banks; keep their savings in their mattresses; and hold back on investments and consumption. And that's not beneficial for the development of a country or a region.

In what way does the situation in Greece affect countries in the European Union that aren't part of the euro, particularly Sweden?
Sweden is a country with a relatively strong economy. Sweden isn't very exposed to Greece: only about 0.2 percent of Swedish export goes to Greece. So I'd say the effects are pretty small. However, there are indirect effects: insecurities are never profitable for economic growth or creation of jobs, because it holds back on investments and economic activity. Swedish industries are potentially negatively affected due to this as it's creating an insecurity on Europe's potential to grow. It may also cause the krona to be more expensive, which affects Swedish export industries negatively.

On Monday, Sweden's finance minister, Magdalena Andersson, said that, "it's not Swedish taxpayers who have huge loans to Greece. This is a matter of the Eurozone." Is that right that Swedish tax-money don't have anything to do with this crises whatsoever?
I'd say that her claims are pretty much accurate. Sweden has not been lending out huge sums of money to the Greek state. Sweden hasn't been part of the huge support programs that have been given to Greece, since we're not part of the Eurozone. But as I said, we are affected anyway. Also, the Swedish national bank lowered the interest rate pretty recently, which was quite unexpected. I think that was because they wanted to be pro-active in meeting this new, drastic development when it comes to the Greek crisis.

Say that Greece would exit the euro. Would it be possible for their economy to recover in a similar way that Iceland has? Are there any similarities between the two nations at all?
Well, the similarities are theoretical. Considering that Greece would get an independent central bank, they would also get the "interest rate weapon", which can be elaborated with to cool down the economy if things go well, or give them the opportunity to print money if the economy isn't going that well. You can stimulate the economy. The problem with Greece is that, unlike Iceland, they don't really have a strong export sector that would benefit from a cheaper currency. The country doesn't trade much with the rest of the world. They import more than what they export. So if they would turn their back on the Eurozone – this is my evaluation of the situation – it would cost them more than what it'd benefit them.

Should we think about the way we spend or save money in a particular way during times like these?
I think that insecurities in the world economy, particularly Europe's, have risen. Risks have risen, too. I think it's important to follow the developments regarding the on-going negotiations. But I don't think common people should act drastically based on individual occurrences in this process. Just make sure you follow the progress.

Magdalena Andersson also mentioned Sweden's economic crisis in the 90s when she talked about the current situation in Greece. I know that Sweden has a stronger export section than what Greece has, but do you think Greece can look back at how Sweden dealt with the crisis in the 90s and learn something from that at all?
I think there are plenty of lessons to be learned from what Sweden has experienced. I also think Sweden can learn from the current crisis in Greece. But looking at what Greece can learn, it's a lot about structural reforms. What mainly caused Sweden to get back on its feet was – apart from balancing the budget – to make important structural reforms that increased competition, opening up precious closed sectors for competition and reduce a previously quite fat public sector, which caused the economy to be more sufficient. I think Greece can learn from that, because that's what will determine whether or not Greece will be able to grow financially.

Sweden should be reminded of how important it is with responsible public finances. And make sure we take care of mechanisms that establish and maintain responsible public finances.

Valid point. Thanks, Andreas.

Want some background? Here's a brief history of Greek debt.

Previously:

What Greece's 'No' Referendum Vote Means for Europe

Five Predictions for How the Greek Crisis Could Play Out

Explaining Yanis Varoufakis: Greece's Anti-Austerity 'Rock Star'