The events unfolding in a small nation halfway around the globe will have far reaching effects that will impact the financial & economic markets. While Canada’s direct trade exposure to Europe is only 10%, TD examined what a potential Greek exit from the euro would mean on our economy.
On Canada’s housing market specifically, TD writes:
While corporate balance sheets remain strong, household debt has become excessive and the housing market is in our view 10-15% overvalued, leaving households more vulnerable to a negative economic event.
A global ﬁnancial crisis could be a major catalyst for a sharp housing market correction and household deleveraging – albeit to a lesser extent than was evident in the U.S. during the past recession.
Moreover, Canadian governments would have less room to stimulate compared to the ﬁrst crisis in 2008-2009. While Canada’s economy would probably still fare better than most in the eurozone under this scenario, it would likely underperform that of the United States.
In a worse case scenario, the Canadian economy would likely endure a severe recession, with the decline being substantially worse than that experienced during the recent recession as both exports and domestic spending contract heavily.
TD has written several reports on what a possible Greek exit from the euro would have. Click below to read each report: