As Taiwan’s economy relies heavily on exports, it should be vigilant against a possible domino effect caused by the escalating Greek debt crisis, as crumbling talks with its European creditors over the weekend pushed Greece to the brink of bankruptcy, which could have substantial repercussions.
Greece was expected to default on a 1.6 billion euro loan repayment to the IMF yesterday, with international creditors refusing yet another loan extension due to a lack of substantial economic reform measures.
Greece on Monday announced the closure of banks for one week and imposed capital controls after Greek bank deposits fell to an 11-year low. Greek Prime Minister Alexis Tsipras’ announcement that its European lenders’ fresh bailout measures would be put before voters in a referendum brings the nation one step closer to exiting the euro.
Taiwanese markets suffered from the intensifying Greek debt crisis as the latest developments left investors fretting that a Greek exit from the euro would destabilize economic recovery in the eurozone and even affect the global economy.
The TAIEX took a nosedive on Monday to 9,236.1, below the monthly average of 9,300, as investors scrambled to sell equities. Foreign investors sold a net total of NT$7.1 billion (US$228.52 million) of local shares on Monday. Among Asian markets, which were the first to trade in the wake of the weekend’s developments in Greece, the Nikkei 225 stock average in Tokyo plunged 2.9 percent, while the Shanghai Composite Index tumbled 3.3 percent and Hong Kong’s Hang Seng sank 2.6 percent.
As the Greek drama played out, the Dow Jones Industrial Average and S&P dipped 1.95 percent and 2.09 percent overnight respectively, while the FTSE 100 in London fell 1.97 percent and the DAX in Frankfurt, Germany, plunged 3.56 percent.
For Taiwan, the Greek debt crisis might seem somewhat irrelevant given that as of April, the nation’s 37 lenders’ combined exposure to Greece totaled NT$35 million, and local insurance companies and fund brokerages do not hold any position in Greek securities, according to the Financial Supervisory Commission.
Despite the TAIEX yesterday bouncing back 0.94 percent, Taiwan should be wary, as the repercussions of the Greek debt crisis are likely to result in a weakened euro and have an impact on single-currency economies, translating into slower consumer spending and less private investment. Such a scenario would result in weakened demand for electronics. As Europe is one of the major overseas markets for Taiwan’s machine tool suppliers and electronics brands, such as Acer Inc, Asustek Computer Inc and HTC Corp, a faltering European economy and a decline in private consumption would impact negatively on local exports.
Europe is the fourth-largest export destination for Taiwanese manufacturers, accounting for 8.8 percent of exports in the first five months of this year, according to the latest statistics released by the Ministry of Finance. Exports to Europe contracted at an annual rate of 12 percent to US$10.49 billion in the first quarter, while total exports fell 5.7 percent year-on-year, marking the sixth consecutive month of annual decline, ministry data showed. Electronic products were the biggest export item, accounting for nearly 33 percent during the same period.
The statistics did not include goods exported to China and then re-exported to Europe. Including re-exported goods, Europe was the second-largest market, after China, accounting for 18 percent of Taiwan’s exports, surpassing ASEAN and the US, which accounted for 18 percent and 12 percent respectively.
Due to the effects of globalization, adverse economic conditions can affect the global economy. As Taiwan is a small economy, vulnerable to market volatility, it must prepare for major economic changes.
Concerns that the US might abandon Taiwan are often overstated. While US President Donald Trump’s handling of Ukraine raised unease in Taiwan, it is crucial to recognize that Taiwan is not Ukraine. Under Trump, the US views Ukraine largely as a European problem, whereas the Indo-Pacific region remains its primary geopolitical focus. Taipei holds immense strategic value for Washington and is unlikely to be treated as a bargaining chip in US-China relations. Trump’s vision of “making America great again” would be directly undermined by any move to abandon Taiwan. Despite the rhetoric of “America First,” the Trump administration understands the necessity of
In an article published on this page on Tuesday, Kaohsiung-based journalist Julien Oeuillet wrote that “legions of people worldwide would care if a disaster occurred in South Korea or Japan, but the same people would not bat an eyelid if Taiwan disappeared.” That is quite a statement. We are constantly reading about the importance of Taiwan Semiconductor Manufacturing Co (TSMC), hailed in Taiwan as the nation’s “silicon shield” protecting it from hostile foreign forces such as the Chinese Communist Party (CCP), and so crucial to the global supply chain for semiconductors that its loss would cost the global economy US$1
US President Donald Trump’s challenge to domestic American economic-political priorities, and abroad to the global balance of power, are not a threat to the security of Taiwan. Trump’s success can go far to contain the real threat — the Chinese Communist Party’s (CCP) surge to hegemony — while offering expanded defensive opportunities for Taiwan. In a stunning affirmation of the CCP policy of “forceful reunification,” an obscene euphemism for the invasion of Taiwan and the destruction of its democracy, on March 13, 2024, the People’s Liberation Army’s (PLA) used Chinese social media platforms to show the first-time linkage of three new
Sasha B. Chhabra’s column (“Michelle Yeoh should no longer be welcome,” March 26, page 8) lamented an Instagram post by renowned actress Michelle Yeoh (楊紫瓊) about her recent visit to “Taipei, China.” It is Chhabra’s opinion that, in response to parroting Beijing’s propaganda about the status of Taiwan, Yeoh should be banned from entering this nation and her films cut off from funding by government-backed agencies, as well as disqualified from competing in the Golden Horse Awards. She and other celebrities, he wrote, must be made to understand “that there are consequences for their actions if they become political pawns of
RSS