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by Kristina C.June 22, 2011
What does the debt crisis in Greece means for people in North America and in the US in particular?
At a Wednesday press conference, US Federal Reserve chairman Ben Bernanke spoke of fears that a “domino” effect could happen, in which, should Greece default on its loans, a crisis would ensue in the European economic system and then the global financial system. The New York Times quotes Bernanke:
“…a disorderly default in one of those countries [including Greece] would no doubt roil financial markets globally. It would have a big impact on credit spreads, on stock prices and so on. And so in that respect I think the effects in the United States would be quite significant.”
While American banks aren’t big lenders to Greece — German and French banks hold about $90 billion in public and private Greek debt — they are “big players in the derivatives market,” as a New York Times editorial entitled “Greece and You” says. Derivatives are financial “instruments” whose value derives from the “behavior” of variables including stocks, bonds and commodities. Americans got a big lesson in the need for transparency about derivatives when the federal government had to bailout American International Group to the tune of $182 billion in 2008. As the New York Times says, it’s possible, but not at all known, that a few companies could hold derivative as insurance against Greece debt — and it’s not certain that, were Greece to default on its loans, if those companies have the billions of dollars they would have to pay out.
Without a bailout from European nations, Greece will run out of money by April of 2012. Currently, the country’s debt burden is worth 150 percent of its annual economic ability, one of the highest in the world. Last week Socialist Prime Minister George Papandreou was forced to reshuffled his cabinet and replace his finance minister, George Papaconstantinou, after weeks of thousands demonstrating in Syntagma Square and elsewhere about proposed austerity measures — measures that are to follow months of cuts to jobs and pensions and raises in taxes.
Papandreou won a vote of confidence in his government late on Tuesday by a vote of 155 to 143, with two abstentions, the BBC notes. Now he and new finance minister Evangelos Venizelos face the thoroughly daunting challenge of getting the Greek Parliament or Vouli ton Ellenon to approve five-year package of 28 billion euros (about $40 billion) of tax increases and spending cuts by June 28. They then have to get reforms passed to implement those tax hikes and cuts in time for a July 3 meeting of eurozone ministers, in the hope of securing the latest tranche of the 110 euro (about $157 billion) bailout package from the European Union and the International Monetary Fund.
The Guardian has a timeline about “Greece’s journey” into the current financial crisis since it joined the euro zone ten years ago. The second slide is from November 14, 2004 and notes that
Greece admits fudging euro entry. The first clear proof that all is not well in Greece comes when the government admits it has not actually met the qualifying standard to join the eurozone at all. Revised budget data shows that the Greek budget deficit has never been below 3% since 1999, as EU rules demand.
All is indeed not well: Greece owes 340 billion euros (about $487 billion) of debts, which amounts to 30,000 euros (about $43,000) per person. The Greek government also must sell off — privatize — state assets including the ports of the Piraeus and of Thessaloniki, the Greek telecommunications company, the postal bank, the national railway system and (as the New York Times puts it), “prime Mediterranean real estate.”
I’ve been following the debt crisis in Greece carefully as I’ve friends there, most with children with — like my son — disabilities. As you may have gathered, services (like special education) and accommodations (like ramps) for children and adults with disabilities in a debt-plagued country on the verge of cutting swaths of its public sector workforce are not at all what they are in the US. Most people think first of Greece’s rich archaeological heritage and certainly tourism is a major bulwark of the country’s economy — but please think also of the thousands gathering, even in the rain in Athens, Thessaloniki, Patras and elsewhere, and also the many more who are living with the fallout from the economic crisis.
Read more: Why Should You Care About What Happens in Greece | Care2 Causes
What does the debt crisis in Greece means for people in North America and in the US in particular?
At a Wednesday press conference, US Federal Reserve chairman Ben Bernanke spoke of fears that a “domino” effect could happen, in which, should Greece default on its loans, a crisis would ensue in the European economic system and then the global financial system. The New York Times quotes Bernanke:
“…a disorderly default in one of those countries [including Greece] would no doubt roil financial markets globally. It would have a big impact on credit spreads, on stock prices and so on. And so in that respect I think the effects in the United States would be quite significant.”
While American banks aren’t big lenders to Greece — German and French banks hold about $90 billion in public and private Greek debt — they are “big players in the derivatives market,” as a New York Times editorial entitled “Greece and You” says. Derivatives are financial “instruments” whose value derives from the “behavior” of variables including stocks, bonds and commodities. Americans got a big lesson in the need for transparency about derivatives when the federal government had to bailout American International Group to the tune of $182 billion in 2008. As the New York Times says, it’s possible, but not at all known, that a few companies could hold derivative as insurance against Greece debt — and it’s not certain that, were Greece to default on its loans, if those companies have the billions of dollars they would have to pay out.
Without a bailout from European nations, Greece will run out of money by April of 2012. Currently, the country’s debt burden is worth 150 percent of its annual economic ability, one of the highest in the world. Last week Socialist Prime Minister George Papandreou was forced to reshuffled his cabinet and replace his finance minister, George Papaconstantinou, after weeks of thousands demonstrating in Syntagma Square and elsewhere about proposed austerity measures — measures that are to follow months of cuts to jobs and pensions and raises in taxes.
Papandreou won a vote of confidence in his government late on Tuesday by a vote of 155 to 143, with two abstentions, the BBC notes. Now he and new finance minister Evangelos Venizelos face the thoroughly daunting challenge of getting the Greek Parliament or Vouli ton Ellenon to approve five-year package of 28 billion euros (about $40 billion) of tax increases and spending cuts by June 28. They then have to get reforms passed to implement those tax hikes and cuts in time for a July 3 meeting of eurozone ministers, in the hope of securing the latest tranche of the 110 euro (about $157 billion) bailout package from the European Union and the International Monetary Fund.
The Guardian has a timeline about “Greece’s journey” into the current financial crisis since it joined the euro zone ten years ago. The second slide is from November 14, 2004 and notes that
Greece admits fudging euro entry. The first clear proof that all is not well in Greece comes when the government admits it has not actually met the qualifying standard to join the eurozone at all. Revised budget data shows that the Greek budget deficit has never been below 3% since 1999, as EU rules demand.
All is indeed not well: Greece owes 340 billion euros (about $487 billion) of debts, which amounts to 30,000 euros (about $43,000) per person. The Greek government also must sell off — privatize — state assets including the ports of the Piraeus and of Thessaloniki, the Greek telecommunications company, the postal bank, the national railway system and (as the New York Times puts it), “prime Mediterranean real estate.”
I’ve been following the debt crisis in Greece carefully as I’ve friends there, most with children with — like my son — disabilities. As you may have gathered, services (like special education) and accommodations (like ramps) for children and adults with disabilities in a debt-plagued country on the verge of cutting swaths of its public sector workforce are not at all what they are in the US. Most people think first of Greece’s rich archaeological heritage and certainly tourism is a major bulwark of the country’s economy — but please think also of the thousands gathering, even in the rain in Athens, Thessaloniki, Patras and elsewhere, and also the many more who are living with the fallout from the economic crisis.
Read more: Why Should You Care About What Happens in Greece | Care2 Causes
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