News / Europe

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

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 Srebrenica Anniversary Resolution

Samantha Power says there's broad consensus about killings in Bosnia's war, but Russia calls resolution 'divisive,' backs countermeasure at UN 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.
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.
Family of American Marine Calls for Release From Iranian Prisoni
X
Heather Murdock
July 01, 2015 8:59 PM
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 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 Nubians in Kenya Face Land Challenges

East Africa's ethnic Nubians have a rich cultural history that dates back thousands of years, but in Kenya they are facing hardships, including the loss of lands they have lived on for generations. They say the government has reneged on its pledge to award them title deeds for the plots. VOA's Lenny Ruvaga reports.
Video

Video Military Experts Question New Russian Tank Capabilities

Russia has been showing off its new tank design – the Armata T-14. Designers claim it is 20 years ahead of current Western designs - and driving it feels like playing a computer game. But military analysts question those assertions, and warn the cost could be too heavy a burden for Russia’s struggling economy. 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