Greece and Israel share several commonalities: same area of the Mediterranean, similar historical struggles in late 1940s, an average monthly wage around EU1,400, and football teams that often promise more than they deliver.

Economically, Israel has long ago moved ahead. The Holyland has abandoned many (not all) of the anomalies that plague the Greek Treasury today. For example, there are no special tax breaks for singles. The unions have an important role, but they do not take their opposition to the streets in the form of violence.

Most analysts agree that the direct fall out from the Greek bail out will be relatively limited. Israeli banks are thought to have a minimal exposure of around US$20 million. Annual exports to Greece barely top the US$300 million figure. Thus, at the first level, the damage to Israel will be targeted and limited. And similar stats apply to the commercial relationships with Portugal.

Of more concern are the indirect or knock-on effects. Three specific issues come to mind.

1. If the Euro collapses, then the shekel will appreciate in comparison, which will make Israeli exports less attractive to Europeans. Ouch! So far, the change has not been significant.
2. On a parallel theme, if the European economy takes a hit – and there are continued concerns about the Spanish, Portuguese and even the British economies – Israeli goods and services will again find overseas markets harder to preserve.

Exports of goods to Europe, not including diamonds, account for about 29% of all exports, according to the Israel Export Institute. Exports of goods to Europe, not including diamonds, for the first three months of 2010 were 31% of total exports, down from 33% during the same period in 2009.

3.  And there is the psychological element, which cannot be predicted. Investments are often determined by confidence or a feel-good factor. With 3 countries around the Med facing the economic heat this summer, outsiders may not be willing to rush into the Israeli stock market or its high tech sector. Punished for events beyond your control?