News / Economy

    Economists: Greek Economic Problems Could Spread

    Protests over Greece's austerity measures (file photo)Protests over Greece's austerity measures (file photo)
    x
    Protests over Greece's austerity measures (file photo)
    Protests over Greece's austerity measures (file photo)
    Jim Randle
    How can problems in Greece’s relatively small economy cause problems for the rest of Europe and even far-away Asia and the United States?  Some economists say that international loans and worried investors are among the reasons for the fear of financial contagion.

    Economic austerity measures recently sparked riots in Greece as some citizens protested cuts in government spending, services, wages along with tax increases.

    The bitter medicine was intended to help the troubled government repay loans that made up the difference between high levels of government spending and low levels of tax revenue.  

    Stratfor analyst Peter Zeihan says Greece’s economy has too many people working for the government and too little industry.

    “The Greek system does not have an industrial base. Its primary business was in shipbuilding and that has been almost completely over taken by the Chinese and the Koreans.  All that really leaves is tourism.  You cannot support a country Greece’s size on tourism,” Zeihan said.

    Stratfor does political and economic analysis for business and governments.
    Greece’s lack of economic power makes it harder for it to pay back loans.  Richard DeKaser of the Parthenon Group in Boston, says, if the Greek government cannot repay its loans, it will hurt lenders, who in turn will have trouble repaying loans they have taken out from other financial institutions.

    "So the worry is that Greece defaults, certain banks take losses, those losses affect counter-party banks, the entire banking system goes into contraction (shrinks)," DeKaser said.

    With banks less able and less willing to make loans, economic activity slows or even stalls.

    American Enterprise Institute economist John Makin says Greece’s economic and political problems could force it to leave the group of nations that use the euro.   He says that makes investors and lenders worry about other euro member nations with heavy debts.  

    “People start asking, if Greece leaves, what about Spain? They are experiencing some of the same symptoms. What about Portugal?,” Makin said.

    Worried investors and lenders will make fewer loans to nations that seem to have Greece’s problems.  That perceived increase in risk means borrowers will have to pay higher interest rates to get loans, sharply raising their costs and hurting growth.

    Many economists say a Greek default could do serious harm to many economies.  But Greece’s problems have been well-known for some time, allowing lenders and others to sell off risky Greek investments, reducing the potential damage.

    Richard DeKaser also says a political accommodation might also ease the crisis.
    “I think the most likely scenario is that we get another ‘muddle through' compromise,” DeKaser said.

    He says protesters and angry voters have sent a message that austerity measures have been too severe and officials may become more flexible as they seek a way out of the crisis.

    You May Like

    Top US General: Turkish Media Report ‘Absurd'

    General Dunford rejects ‘irresponsible' claims of coup involvement by former four-star Army General Campbell, who led NATO forces in Afghanistan before retiring earlier this year

    Video Saving Ethiopian Children Thought to Be Cursed

    'Omo Child' looks at efforts of one African man to stop killings of ‘mingi’ children

    Protests Over Western Troops Threaten Libyan 'Unity' Government

    Fears mount that Islamist foes of ‘unity' government plan to declare a revolutionaries' council in Tripoli

    This forum has been closed.
    Comment Sorting
    Comments
         
    by: Taxed Enough from: USA
    May 21, 2012 10:52 AM
    A do nothing government job and full retirement at 53 years old. And they can't find anybody who wants to pay for it? Who would have thought it would be such a problem?

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    London’s Financial Crown at Risk as Rivals Eye Brexit Opportunitiesi
    X
    VOA News
    July 25, 2016 5:09 PM
    By most measures, London rivals New York as the only true global financial center. But Britain’s vote to leave the European Union – so-called ‘Brexit’ – means the city could lose its right to sell services tariff-free across the bloc, risking its position as Europe’s financial headquarters. Already some banks have said they may shift operations to the mainland. Henry Ridgwell reports from London.
    Video

    Video London’s Financial Crown at Risk as Rivals Eye Brexit Opportunities

    By most measures, London rivals New York as the only true global financial center. But Britain’s vote to leave the European Union – so-called ‘Brexit’ – means the city could lose its right to sell services tariff-free across the bloc, risking its position as Europe’s financial headquarters. Already some banks have said they may shift operations to the mainland. Henry Ridgwell reports from London.
    Video

    Video Recycling Lifeline for Lebanon’s Last Glassblowers

    In a small Lebanese coastal town, one family is preserving a craft that stretches back millennia. The art of glass blowing was developed by Phoenicians in the region, and the Khalifehs say they are the only ones keeping the skill alive in Lebanon. But despite teaming up with an eco-entrepreneur and receiving an unexpected boost from the country’s recent trash crisis the future remains uncertain. John Owens reports from Sarafand.
    Video

    Video Migrants Continue to Risk Lives Crossing US Border from Mexico

    In his speech Thursday before the Republican National Convention, the party’s presidential candidate, Donald Trump, reiterated his proposal to build a wall along the U.S.-Mexico border if elected. Polls show a large percentage of Americans support better control of the nation's southwestern border, but as VOA’s Greg Flakus reports from the border town of Nogales in the Mexican state of Sonora, the situation faced by people trying to cross the border is already daunting.
    Video

    Video In State of Emergency, Turkey’s Erdogan Focuses on Spiritual Movement

    The state of emergency that Turkish President Recep Tayyip Erdogan has declared is giving him even more power to expand a purge that has seen an estimated 60,000 people either arrested or suspended from their jobs. VOA Europe correspondent Luis Ramirez reports from Istanbul.
    Video

    Video Calm the Waters: US Doubles Down Diplomatic Efforts in ASEAN Meetings

    The United States is redoubling diplomatic efforts and looking to upcoming regional meetings to calm the waters after an international tribunal invalidated the legal basis of Beijing's extensive claims in the South China Sea. VOA State Department correspondent Nike Ching has the story.
    Video

    Video Four Brother Goats Arrive in Brooklyn on a Mission

    While it's unusual to see farm animals in cities, it's become familiar for residents of Brooklyn, New York, to see a little herd of goats. Unlike gas-powered mowing equipment, goats remove invasive weeds quietly and without adding more pollution to the air. As Faiza Elmasry tells us, this is a pilot program and if it proves to be successful, the goat gardener program will be extended to other areas of New York. Faith Lapidus narrates.
    Video

    Video Scientists in Poland Race to Save Honeybees

    Honeybees are in danger worldwide. Causes of what's known as colony collapse disorder range from pesticides and loss of habitat to infections. But scientists in Poland say they are on track to finding a cure for one of the diseases. VOA’s George Putic reports.
    Video

    Video Wall Already Runs Along Parts of US-Mexico Border

    The Republican Party’s presidential nominee, Donald Trump, gained the support of many voters by saying he would build a wall to keep undocumented immigrants and drugs from coming across the border from Mexico. Critics have called his idea impractical and offensive to Mexico, while supporters say such a bold approach is needed to control the border. VOA’s Greg Flakus has more from the border town of Nogales, Arizona.
    Video

    Video New HIV Tests Emphasize Rapid Results

    As the global fight against AIDS intensifies, activists have placed increasing importance on getting people to know their HIV status. Some companies are developing new HIV testing methods designed to be quick, easy and accurate. Thuso Khumalo looks at the latest methods, presented at the International AIDS conference in Durban, South Africa.
    Video

    Video African Youth with HIV Urge More Support

    HIV, the virus that causes AIDS, is the top killer of teens in sub-Saharan Africa. But many youths say their experience with the virus is unique and needs to be addressed differently than the adult epidemic. VOA South African Correspondent Anita Powell reports.
    Video

    Video Pop-Up Art Comes to Your Living Room, Backyard and Elsewhere

    Around the world, independent artists and musicians wrestle with a common problem: where to exhibit or perform? Traditional spaces such as museums and galleries are reserved for bigger names, and renting a space is not feasible for many. Enter ArtsUp, which connects artists with venue owners. Whether it’s a living room, restaurant, office or even a boat, pop-up events are bringing music and art to unexpected places. Tina Trinh has more.
    Video

    Video Scotland’s Booming Whisky Industry Fears Brexit Hangover

    After Britain’s vote to leave the European Union, Scotland’s government wants to break away from the United Kingdom – fearing the nation’s exports are at risk. Among the biggest of these is whisky. Henry Ridgwell reports on a time of turmoil for those involved in the ancient art of distilling Scotland’s most famous product.

    Special Report

    Adrift The Invisible African Diaspora

    World Currencies

    EUR
    USD
    0.9093
    JPY
    USD
    104.27
    GBP
    USD
    0.7612
    CAD
    USD
    1.3233
    INR
    USD
    67.329

    Rates may not be current.