News / Europe

Greece Eurozone Exit Would Be Felt Worldwide

Greece Eurozone Exit Would Be Felt Worldwidei
|| 0:00:00
X
May 31, 2012 11:39 PM
Greeks head to the polls again later this month to cast votes for a new government that could ultimately decide whether Greece remains in the eurozone. The parliamentary elections, the second in as many months, became necessary after the country's fractured political parties were unable to form a working coalition. European member states, once fearful of panicking financial markets, have begun making contingency plans for a possible Greek exit. But at what cost? As Mil Arcega reports, despite its small size, what happens in Greece could have an oversized impact on the global economy.

Greece Eurozone Exit Would Be Felt Worldwide

Greeks head to the polls again later this month to cast votes for a new government that could ultimately decide whether Greece remains in the eurozone.  The parliamentary elections, the second in as many months, became necessary after the country's fractured political parties were unable to form a working coalition.  European member states, once fearful of panicking financial markets, have begun making contingency plans for a possible Greek exit.  But at what cost?  Despite its small size, what happens in Greece could have an oversized impact on the global economy.

With a population just under 11 million, and an annual GDP of about $300 billion, Greece is ranked 41st in a list of the world's industrialized countries.  But with a sovereign debt nearly double its annual output, Greece is one of the weakest links in what has become a protracted European crisis.  

Simon Johnson is an economist at the Peterson Institute for International Economics.

"The European Union is more than a quarter of the world's output and they have brought upon themselves and mismanaged a very serious crisis, so I'm afraid the implications for many countries are going to be quite dire," said Johnson.

Many see Greek elections in June as a referendum on the tough austerity measures demanded by the European Union in exchange for bailouts.  But it's a referendum that could result in Greece becoming the first to leave the eurozone.

Analysts say a messy divorce could lead to higher borrowing costs for weaker economies, plunging countries such as Spain and Italy deeper into recession.

The financial ripples could reach across the Atlantic, shaving as much as one percent off U.S. growth.  Enough, says economics professor Peter Morici, to halt an already tepid U.S. recovery.

"We are only growing at about 2 percent a year right now," said Morici. "If we took another half a point off that, we're getting down to a level that can't be sustained.  The economy could likely tumble into a recession."

Despite its minimal exposure to Greece, analysts say the threat of a double dip recession in the world's largest economy would be enough to roil already shaky financial markets.
 
Banks with greater exposure to European debt could see a run on deposits - some would face outright collapse.
 
Even faster growing economies in Asia can expect sharp declines as exports to the West dry up.
 
Ironically, Morici says Greece would be better off with a carefully managed exit from the monetary union.  But he doesn't think that will happen.

"I expect the Greeks to elect the government that will keep them in the eurozone, and that they will implement the austerity program and that Greece will continue to cycle downward," he said. "This time next year, we'll be talking about 25 percent unemployment in Greece, much more than 50 percent youth unemployment, young professionals leaving the country and Greece slipping into developing country status."

Europe's Central Bank chief Mario Draghihas acknowledged the severity of the crisis, describing Europe's present course as "unsustainable."  But even as he calls for urgent reforms - others insist Europe's experiment in a common currency has failed - pointing to Greece as an example of why it has not worked.

You May Like

Video Is West Doing Enough to Tackle Islamic State?

There is growing uncertainty over whether West’s response to ISIS is adequate More

China Crackdown on Dual Citizens Causes Concern

New policy encourages reporting people who obtain citizenship in another country, but retain Chinese citizenship; move spurs sharp debate More

Video Coalition to Fight Islamic State Could Reward Assad

Losing ground to Islamic State fighters, Syria's government says it is ready to cooperate with international community 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.
Is West Doing Enough to Tackle Islamic State?i
X
Henry Ridgwell
August 29, 2014 12:26 AM
U.S. President Barack Obama has ruled out sending ground troops to Iraq to fight militants of the so-called Islamic State, or ISIS, despite officials in Washington describing the extremist group as the biggest threat the United States has faced in years. Henry Ridgwell reports from London on the growing uncertainty over whether the West’s response to ISIS will be enough to defeat the terrorist threat.
Video

Video Is West Doing Enough to Tackle Islamic State?

U.S. President Barack Obama has ruled out sending ground troops to Iraq to fight militants of the so-called Islamic State, or ISIS, despite officials in Washington describing the extremist group as the biggest threat the United States has faced in years. Henry Ridgwell reports from London on the growing uncertainty over whether the West’s response to ISIS will be enough to defeat the terrorist threat.
Video

Video Pachyderms Play Polo to Raise Money for Elephants

Polo, the ancient team competition typically played on horseback, is known as the “sport of kings.” However, the royal version for one annual event in Thailand swaps the horse for the kingdom’s national symbol - the elephant. VOA Correspondent Steve Herman in Samut Prakan reports that the King’s Cup Elephant Polo tournament is all for a good cause.
Video

Video Coalition to Fight Islamic State Could Reward Assad

The United States along with European and Mideast allies are considering a broader assault against Islamic State fighters who have spread from Syria into Iraq and risk further destabilizing an already troubled region. But as VOA State Department Correspondent Scott Stearns reports, confronting those militants could end up helping the embattled Syrian President Bashar al-Assad.
Video

Video Made in America Socks Get Toehold in Online Fashion Market

Three young entrepreneurs are hoping to revolutionize the high-end sock industry by introducing all-American creations of their own. And they’re doing most of it the old-fashioned way. VOA’s Julie Taboh recently caught up with them to learn what goes into making their one-of-a-kind socks.
Video

Video Americans, Ex-Pats Send Relief Supplies to West Africa

Health organizations from around the world are sending supplies and specialists to the West African countries that are dealing with the worst Ebola outbreak in history. On a smaller scale, ordinary Americans and African expatriates living in the United States are doing the same. VOA's Carol Pearson reports.
Video

Video America's Most Popular Artworks Displayed in Public Places

Public places in cities across America were turned into open-air art galleries in August. Pictures of the nation’s most popular artworks were displayed on billboards, bus shelters, subway platforms and more. The idea behind “Art Everywhere,” a collaborative campaign by five major museums is to allow more people to enjoy art and learn about the country’s culture and history. Faiza Elmasry has more.
Video

Video Chinese Doctors Use 3-D Spinal Implant

A Chinese boy suffering from a debilitating bone disease has become the first patient with a part of his spine created in a three-dimensional printer. Doctors say he will soon regain normal mobility. VOA’s George Putic reports.
Video

Video Uneasy Calm Settles Over Israel, Gaza Strip

Israel and the Gaza Strip have been calm since a cease-fire set in Tuesday evening, ending seven weeks of hostilities. Hamas, which controls Gaza, declared victory. Israelis were more wart. VOA’s Scott Bobb reports from Jerusalem.
Video

Video India’s Leprosy Battle Stymied by Continuing Stigma

Medical advancements in the treatment of leprosy have greatly diminished its impact around the world, largely eliminating the disease from most countries. India made great strides in combating leprosy, but still accounts for a majority of the world’s new cases each year, and the number of newly infected Indians is rising - more than 130,000 recorded last year. Doctors there say the problem has more to do with society than science. Shaikh Azizur Rahman reports from Kolkata.
Video

Video Scientists Unlock Mystery of Bird Flocks

How can flocks of birds, schools of fish or herds of antelope suddenly change direction -- all the individuals adjusting their movement in concert, at seemingly the same time? British researchers now have some insights into this behavior, which has puzzled scientists for a long time. VOA's George Putic has more.

AppleAndroid