By Jorn Madslien
Business reporter, BBC News
People across Europe, not just the Greeks, may well have to work longer before they can retire, economists warn
Greece's economic problems matter, not just to heads of governments, but also to private individuals.
This is obvious for the Greeks who will soon have to get used to no pay rises, higher taxes, raised petrol prices and two more years of work before they get to retire.
But people elsewhere in Europe may also find that Greece's troubles could eventually hit their wallets.
Cost to taxpayers
The most obvious way would be through tax bills, if Europe agrees to ride to the rescue and help Greece deal with its mounting public and foreign debts.
It is not yet clear what leaders of eurozone nations have agreed to do, but one thing is certain: any assistance will come at a cost that will ultimately have to be borne by taxpayers in the nations that contribute.
European citizens, both those within and those outside the eurozone, would even have to contribute indirectly if the International Monetery Fund was to get involved, since it is funded by a charge - known as a "quota" - paid by member nations.
But their contribution would have been reduced proportionally with contributions made by non-European countries.
In other words, the financial burden would have been more widely shared.
All this begs the question; given the costs involved, why is the outside world getting involved in what many see as a Greek problem?
The answer turns the question on its head, pointing out that this was never a problem just facing Greece, but an international one.
Well, partly because the Greek crisis has made investors nervous about lending money to governments through buying government bonds.
Unemployment is expected to remain a problem across Europe
Consequently, everybody's interest rates are heading higher as governments are having to pay a greater risk premium to borrow money, according to Vanessa Rossi, an international economist at Chatham House, a think tank.
"Everybody gets a ripple effect," she says, though how strongly the impact is felt will depend on how much difficulty individual countries are in.
The European Central Bank is expected to raise the eurozone interest rate by half a percentage point to 1.5% later this year, according to a Reuters poll of more than 60 economists conducted between 4 and 9 February.
So the reasons why people outside Europe should care are broadly the same as the reasons why the Greeks should care. Going forth, they too are facing slower wage growth, rising taxes and rising retirement ages as governments everywhere - in the eurozone, the UK, the US and Japan - start slashing their debts.
Take-home pay is likely to fall as it is eroded by rising taxes and everyone will have to work longer before they retire - by which time they are likely to find that their pensions have shrunk.
This is because pension funds by and large invest in stock markets, which have been hit by the crisis in Greece, or they buy government bonds, which have also fallen in value.
"The valuation of wealth is coming down because of the crisis," observes Ms Rossi. This means private sector pension funds will find it harder to make up shortfalls in their pension plans, and even individual pension saving will be hit as asset values are falling.
Heavily indebted countries such as Spain, Portugal and Ireland, or indeed the UK, have been punished more by the markets than, say, Germany.
The crisis is also set to slow down the embryonic economic recovery.
Economic growth in the eurozone is expected to slow to 0.3% during the January to March period, rising to 0.4% in the final quarter of 2010, according to the Reuters poll.
This will prolong the suffering of the unemployed as job creation will be slower than it would have been had there not been a crisis, explains Ms Rossi.
Already, the eurozone unemployment rate stands at about 10%, though in Spain, Europe's fourth largest economy, it is almost 20%.
Even people whose jobs are safe may feel the impact. It is harder to negotiate pay rises during periods when many are competing for every vacant job, so wages are not expected to rise quickly in the near future.
The high and perhaps rising unemployment rate is in turn further curbing the economic recovery.
"Unemployment will continue to be a drag on growth in the coming quarters," according to Isabelle Job, head of macroeconomic research at Credit Agricole CIB.
With rising unemployment, demand for the products companies make tends to fall as people have less money to spend.
With a shrinking market, companies may well reduce their capital investments, instead battening down the hatches, getting ready to ride out the economic storm.
"In an environment of moderate demand prospects and low capacity utilisation rates, there is no expectation of any marked rebound in investment," says Ms Job.
If such a scenario was to play out, the euro could well fall against other currency, in line with the economic weakness in the countries that use it as its currency.
This would be beneficial for exporters within the eurozone, as it would make the products they sell abroad cheaper, which in turn should lead to raised demand.
Exporters would then start hiring more workers and invest more in new production equipment - exactly the sort of developments that would bring about an economic recovery.
And until that happens, a weaker euro will make it cheaper for US, or UK or other non-eurozone tourists to go on holiday in Continental Europe - unless their own currency also takes a tumble.