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

Nigeria Incumbent in Tight Spot as Poll Nears

Muhammadu Buhari is running a strong challenge to Goodluck Jonathan, amid a faltering economy and Boko Haram security worries More

Video Liberia's Almost Last Ebola Patient Grateful but Still Grieving

Beatrice Yardolo tells VOA that despite her fame, life is still a struggle as she waits for government's promise of support to arrive More

Video Cambodian Land Grabs Threaten Traditional Communities

At least seven different indigenous groups in Ratanakiri depend mainly on forest products for their survival, say they face loss of their land, traditional way of life 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.
Liberia's Almost Last Ebola Patient Grateful but Still Grievingi
X
Benno Muchler
March 26, 2015 3:41 PM
Beatrice Yardolo was to make history as Liberia’s last Ebola patient. Liberians recently started counting down 42 days, the period that has to go by without a single new infection until the World Health Organization can declare a country Ebola-free. That countdown stopped on March 20 when there was another new case of Ebola, making Yardolo’s story a reminder that Ebola is far from over. Benno Muchler reports from Monrovia.
Video

Video Liberia's Almost Last Ebola Patient Grateful but Still Grieving

Beatrice Yardolo was to make history as Liberia’s last Ebola patient. Liberians recently started counting down 42 days, the period that has to go by without a single new infection until the World Health Organization can declare a country Ebola-free. That countdown stopped on March 20 when there was another new case of Ebola, making Yardolo’s story a reminder that Ebola is far from over. Benno Muchler reports from Monrovia.
Video

Video Cambodian Land Grabs Threaten Traditional Communities

Indigenous communities in Cambodia's Ratanakiri province say the government’s economic land concession policy is taking away their land and traditional way of life, making many fear that their identity will soon be lost. Local authorities, though, have denied this is the case. VOA's Say Mony went to investigate and filed this report, narrated by Colin Lovett.
Video

Video US, South Korea Conduct Joint Military Exercises

The Eighth U.S. Army Division and the Eighth Republic of Korea Mechanized Infantry Division put on a well orchestrated show of force for the media this week during their joint military training exercises in South Korea. VOA’s Seoul correspondent Brian Padden was there and reports the soldiers were well disciplined both in conducting a complex live fire exercise and in staying on message with the press.
Video

Video Space Program Status Disappoints 'Last Man on the Moon'

One of the films that drew big crowds last week at the annual South by Southwest festival in Austin, Texas, tells the story of the last human being to stand on the moon, U.S. astronaut Eugene Cernan. It has been 42 years since Cernan returned from the moon and he laments that no one else has gone there since. VOA’s Greg Flakus reports.
Video

Video Young Filmmakers Shine Spotlight on Giving Back

A group of student filmmakers from across the United States joined President Barack Obama at the White House this month for the second annual White House Student Film Festival. Fifteen short films were officially selected from more than 1,500 entries by students aged 6 through 18. The filmmakers and their families then joined the president and a group of celebrities for a screening of their films. VOA’s Julie Taboh reports.
Video

Video VOA Exclusive: Interview with Afghan President Ashraf Ghani

Afghan President Ashraf Ghani, during his first visit as president to Washington, gave a one-on-one interview with VOA Afghan Service reporter Said Suleiman Ashna, about his request for a change in U.S. troop levels, the threat from the Islamic State, and repairing relations with the United States and Pakistan. The interview was held at Blair House, late Sunday, in Pashto.
Video

Video California Science Center Tells Story of Dead Sea Scrolls

The ancient manuscripts were uncovered in the mid-20th century, and they are still yielding clues about life and religious beliefs in ancient Israel. As VOA's Mike O'Sullivan reports, an exhibit in Los Angeles shows how modern science is bringing the history of these ancient documents to life.
Video

Video Angelina Jolie Takes Another Bold Step

Hollywood actress and filmmaker Angelina Jolie has revealed she had her ovaries and fallopian tubes removed to lower her odds of getting cancer. Doctors say the huge publicity over her decision will help raise awareness about the importance of cancer screening. VOA’s George Putic has more

All About America

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More