News / Economy

Financial Problems Threaten Both Sides of the Atlantic

Striking taxi drivers protest part of the country's fiscal recovery program by driving their cars in convoy through the streets of Thessaloniki, Greece, July 20, 2011
Striking taxi drivers protest part of the country's fiscal recovery program by driving their cars in convoy through the streets of Thessaloniki, Greece, July 20, 2011

Multimedia

Financial crises on both sides of the Atlantic are heating up.  And in the United States, there is growing concern that President Barack Obama and Congress will be unable to agree on a deal to raise the government's debt ceiling in order to avoid a default on the federal debt.

The Greek financial crisis loomed over Europe for weeks as frequent and sometimes violent demonstrations and strikes took place to protest government spending cuts and tax hikes aimed at averting a default on Greece's massive debt.

Now there are concerns that the debt crisis will spread to Italy and Spain.

And the United States also is struggling with its own financial woes. Its most recent challenge: raising the government's debt ceiling to avoid default.

Already rating agencies are threatening a downgrade of U.S. debt, bad news for European countries and banks that hold more than $700 billion in U.S. treasuries with the Bank of England leading the way, followed by Switzerland and France.  A downgrade would diminish the value of those holdings, and could bring massive disruptions in the global financial markets.

Iain Begg is a research fellow at the London School of Economics. He says Europe's problems as well as the problems in the U.S. will have a dramatic impact on the world economy. "It's not so much that the first round effects of either event would be so dramatic. It is that the follow on from it, what you might call the tsunami effect, from the original earthquake would be so dramatic that I think it would derail the recovery  and quite possibly pitch the world into a fresh bout of recession," he said.

No matter what the outcome, it will not be easy for either continent to recover, says Begg.  "On both sides of the Atlantic, we see this strange kind of the same political economy trying to work out who is responsible; who should jump first; who should bear the pain on any of the solutions, knowing that someone has to bear pain somewhere," he said.

The danger posed by the eurozone's festering debt crisis was highlighted this week as government officials and commercial bankers remained divided over competing policy proposals for rescuing Greece.

The decision is key to in preventing the region's debt crisis from spreading to other countries.

"This sort of contagion is very, very difficult to control," said Stewart Fleming, a research fellow at Chatham House.

He says the EU should move much more aggressively to prevent the financial crisis from damaging the eurozone. "A severe debt crisis would deal a devastating blow  to the European economy and would lead almost certainly to the break up of the single currency area. It's that important that Europe gets a control of its sovereign debt," he said.

Regardless of what the outcome in both the United States and Europe, one thing most economists agree upon is that time is running out for containing our modern era's fiscal contagion.

You May Like

Turkey's Controversial Reform Bill Giving Investors Jitters

Homeland security reform bill will give police new powers in search, seizure, detention and arrests, while restricting the rights of suspects, their attorneys More

Audio Slideshow In Kenyan Prison, Good Grades Are Path to Freedom

Some inmates who get high marks could see their sentences commuted to non-custodial status More

'Rumble in the Jungle' Turns 40

'The Champ' knocked Foreman out to regain crown he had lost 7 years earlier when US government accused him of draft-dodging and boxing officials revoked his license More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Victorious Secularists Face Challenge to Form Government in Tunisiai
X
Henry Ridgwell
October 30, 2014 11:39 PM
Official results from Tunisia show the Islamist Ennahda party has failed to win the second free election since the so-called "Arab Spring" uprising in 2011. Ennahda, which handed power to a government of technocrats pending the elections, lost out to the secular party Nidaa Tounes. Henry Ridgwell reports from London that the relatively peaceful poll offers some hope in a volatile region.
Video

Video Victorious Secularists Face Challenge to Form Government in Tunisia

Official results from Tunisia show the Islamist Ennahda party has failed to win the second free election since the so-called "Arab Spring" uprising in 2011. Ennahda, which handed power to a government of technocrats pending the elections, lost out to the secular party Nidaa Tounes. Henry Ridgwell reports from London that the relatively peaceful poll offers some hope in a volatile region.
Video

Video Africa Tells its Story Through Fashion

In Africa, Fashion Week is a riot of colors, shapes, patterns and fabrics - against the backdrop of its ongoing struggle between nature and its fast-growing urban edge. How do these ideas translate into needle and thread? VOA’s Anita Powell visited this year’s Mercedes Benz Fashion Week Africa in Johannesburg to find out.
Video

Video Smugglers Offer Cheap Passage From Turkey to Syria

Smugglers in Turkey offer a relatively cheap passage across the border into Syria. Ankara has stepped up efforts to stem the flow of foreign fighters who want to join Islamic State militants fighting for control of the Syrian border city of Kobani. But porous borders and border guards who can be bribed make illegal border crossings quite easy. Zlatica Hoke has more.
Video

Video China Political Meeting Seeks to Improve Rule of Law

China’s communist leaders will host a top level political meeting this week, called the Fourth Plenum, and for the first time in the party’s history, rule of law will be a key item on the agenda. Analysts and Chinese media reports say the meetings could see the approval of long-awaited measures aimed at giving courts more independence and include steps to enhance an already aggressive and high-reaching anti-corruption drive. VOA’s Bill Ide has more from Beijing.
Video

Video After Decades of Pressure, Luxembourg Drops Bank Secrecy Rules

European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video Kobani Refugees Welcome, Turkey Criticizes, US Airdrop

Residents of Kobani in northern Syria have welcomed the airdrop of weapons, ammunition and medicine to Kurdish militia who are resisting the seizure of their city by Islamic State militants. The Turkish government, however, has criticized the operation. VOA’s Scott Bobb reports from southeastern Turkey, across the border from Kobani.

All About America

AppleAndroid

World Currencies

EUR
USD
0.7893
JPY
USD
107.68
GBP
USD
0.6238
CAD
USD
1.1214
INR
USD
61.185

Rates may not be current.