AFTER YEARS OF SPECULATION that Greece could default on their national debt, it has finally happened — and to the surprise of some the world has not ended, at least not yet. As I write this column on Monday for a Thursday publication, emergency meetings are ongoing to try to stave off the collapse of the Greek banking system and force Greece’s exit from the eurozone.

It has been fascinating watching this “crisis” unfold. A few years ago, when fears of a default were first being talked about, the global economy was just beginning to recover from the greatest recession since the Great Depression. The fear was that if Greece defaulted, a struggling and still fragile global economy would sink back into recession as the weight of billions of dollars in losses would be too much for an already struggling banking system to withstand.

Here we are in the middle of 2015, about three years from the early signs that a crisis was looming in Greece, and most U.S. banks have reduced their exposure to Greece and are now largely shielded from any direct losses. What is unknown is the impact Greece’s default will have on Europe’s economy, and by extension the global economy.

It has almost been surreal watching the events over the last week as Greece failed to make their required debt payments, and as Greeks — tired of the austerity measures required by their creditors — have stood up to say, “We won’t take it anymore!” It reminds me of the days when people would stop making payments on their homes to force banks into making concessions. The strategy worked well for many, but left the folks still making their payments in worse shape as home values plummeted.

What we really have here is a game of chicken. Greece is betting it can force its creditors to give better terms by holding out and refusing reforms necessary to return the country to solvency. Its creditors are saying it is time to pay the piper after years of fiscal irresponsibility.

What will happen if they can’t reach an agreement and Greece actually leaves the European Union and starts printing money? Nobody knows for sure; all anyone can do is speculate.

Will we see something similar unfold across Europe, as other struggling nations stop paying their debts, resulting in worsening economic conditions across the continent? Will this impact the global economy and reach across the pond, ultimately affecting us?

If the stock market is any indication, investors across the globe, including in the U.S., are nervous. The so-called “flight to safety” has been in full swing since last week, as stocks have tumbled in value. And even if a crisis is averted and agreements are made before anything worse happens, what will be the long-term implications? Will this make it more difficult for emerging economies to get the help they need? Will it have long-term effects on global economic growth? Only time will tell.

Guy Benjamin (CAL BRE License #01014834, NMLS 887909) writes a weekly column for The Herald, offering general information on real estate matters. As it is impossible to address all possibilities and variations, he will try to answer individual questions by readers who contact him at 707-246-0949 or guyb@fairwaymc.com.

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