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)
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

Lesotho Faces New Round of Violence, Political Crisis

Brutal killing of military officer has sent former leaders back into S. Africa where they're watching anxiously as regional officials head in to try to restore peace More

Video US Diplomat Expects Adoption of Bosnian Massacre Anniversary Resolution

Samantha Power says there's broad consensus about killings in Bosnia's war, but Russia calls resolution 'divisive,' backs UN countermeasure More

UN Report Exposes Widespread Boko Haram Atrocities

Damning report graphically details pattern of vicious, widespread atrocities committed by Islamist militants More

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.
Olympics Construction Scars Sacred Korean Mountaini
X
July 02, 2015 4:10 AM
Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Olympics Construction Scars Sacred Korean Mountain

Environmentalists in South Korea are protesting a Winter Olympics construction project to build a ski slope through a 500-year-old protected forest. Brian Padden reports that although there is strong national support for hosting the 2018 Pyeongchang Winter Olympics, there are growing public concerns over the costs and possible ecological damage at the revered mountain.
Video

Video Xenophobia Victims in South Africa Flee Violence, Then Return

Many Malawians fled South Africa early this year after xenophobic attacks on African immigrants. But many quickly found life was no better at home and have returned to South Africa – often illegally and without jobs, and facing the tough task of having to start over. Lameck Masina and Anita Powell file from Johannesburg.
Video

Video Family of American Marine Calls for Release From Iranian Prison

As the crowd of journalists covering the Iran talks swells, so too do the opportunities for media coverage.  Hoping to catch the attention of high-level diplomats, the family of American-Iranian marine Amir Hekmati is in Vienna, pleading for his release from an Iranian prison after nearly 4 years.  VOA’s Heather Murdock reports from Vienna.
Video

Video UK Holds Terror Drill as MPs Mull Tunisia Response

After pledging a tough response to last Friday’s terror attack in Tunisia, which came just days before the 10th anniversary of the bomb attacks on London’s transport network, British security services are shifting their focus to overseas counter-terror operations. VOA's Henry Ridgwell has more.
Video

Video Obama on Cuba: This is What Change Looks Like

President Barack Obama says the United States will soon reopen its embassy in Cuba for the first time since 1961, ending a half-century of isolation. VOA White House correspondent Luis Ramirez reports.
Video

Video Hate Groups Spread Influence Via Internet

Hate groups of various kinds are using the Internet for propaganda and recruitment, and a Jewish human rights organization that monitors these groups, the Simon Wiesenthal Center, says their influence is growing. The messages are different, but the calls to hatred or violence are similar. VOA's Mike O’Sullivan reports.
Video

Video US Silica Sand Mining Surge Worries Illinois Residents, Businesses

Increased domestic U.S. oil and gas production, thanks to advances known as “fracking,” has created a boom for other industries supporting that extraction. Demand for silica sand, used in fracking, could triple over the next five years. In the Midwest state of Illinois, people living near the mines are worried about how increased silica sand mining will affect their businesses and their health. VOA’s Kane Farabaugh has more in this first of a series of reports.
Video

Video Blind Somali Journalist Defies Odds in Mogadishu

Despite improving security in the last few years, Somalia remains one of the most dangerous countries to be a journalist – even more so for someone who cannot see. Abdulaziz Billow has the story of journalist Abdifatah Hassan Kalgacal, who has been reporting from the Somali capital for the last decade despite being blind.
Video

Video Texas Defies Same-Sex Marriage Ruling

Texas state officials have criticized the US Supreme Court decision giving same-sex couples the right to marry nationwide. The attorney general of Texas says last week's decision did not overrule constitutional "rights of religious liberty," and therefore officials performing wedding services can refuse to perform them for same-sex couples if it is against their religious beliefs. Zlatica Hoke reports on the controversy.
Video

Video Rabbi Hits Road to Heal Jewish-Muslim Relations in France

France is on high alert after last week's terrorist attack near the city Lyon, just six months after deadly Paris shootings. The attack have added new tensions to relations between French Jews and Muslims. France’s Jewish and Muslim communities also share a common heritage, though, and as far as one French rabbi is concerned, they are destined to be friends. From the Paris suburb of La Courneuve, Lisa Bryant reports about Rabbi Michel Serfaty and his friendship bus.
Video

Video Saudi Leaks Expose ‘Checkbook Diplomacy’ In Battle With Iran

Saudi Arabia’s willingness to wield its oil money on the global diplomatic stage appears to have been laid bare, after the website WikiLeaks published tens of thousands of leaked cables from Riyadh’s Ministry of Foreign Affairs. VOA's Henry Ridgwell reports.
Video

Video In Kenya, Police Said to Shoot First, Ask Questions Later

An organization that documents torture and extrajudicial killings says Kenyan police were responsible for 1,252 shooting deaths in five cities, including Nairobi, between 2009 and 2014, representing 67 percent of all gun deaths in the areas reviewed. Gabe Joselow has more from Nairobi.

VOA Blogs

World Currencies

EUR
USD
0.9012
JPY
USD
122.90
GBP
USD
0.6400
CAD
USD
1.2582
INR
USD
63.438

Rates may not be current.