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How can the possible collapse in Greece affect your retirement?



If you keep up with the markets you have probably heard all you want to hear about Greece, Spain, Portugal and the European Union’s (“EU”) financial troubles.  Right now Greece is the most likely to fall and the uncertainly in Europe played havoc on the Dow Jones last year.   Greece is currently facing problems that the USA may face in the future.  In very simple terms their entitlements (Government Spending) are far more than their tax revenues.  Additionally, their national debt is now 160% of their GDP and thus other countries are no longer willing to simply lend money to Greece.  They are having jobs, salaries and pensions (“Austerity Package”) in order to obtain additional bailout funds (loans from the EU).   As the government tries to cut benefits, workers hold strikes and the economy of Greece continue to fall.

 As you look at some of the employment statistics below from “Europe’s debt crisis: Where things stand” by Ben Rooney of CNNMoney Markets:

 EU officials have proposed measures to boost employment, support spending on infrastructure projects and help small businesses grow. But most governments have little room in their budgets to stimulate economic activity.


Economists say the weak economic backdrop raises the risk that a policy “accident” could drive another bout of volatility in financial markets.

The unemployment rate among young people in the eurozone stands at 22% in December, according to data published Tuesday by EU statisticians.

In crisis-hit Greece, youth unemployment is a whopping 47%, while nearly 49% of young people in Spain are out of work.

The exceptionally high levels of youth unemployment have raised concerns that additional austerity measures could give rise to social unrest.

If Greece were to fail, many think the next may be Portugal.  If one or both do fail the strength of the EU will be damaged.  The uncertainty of the stability of the EU can stagnate the US markets as demonstrated in 2011.  The longer this uncertainty exists along with continued recession in EU economies, the more likely that your investments may remain flat or decline.

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