Known as the birthplace of logic and reason, and more popularly as a key tourist destination, Greece has become a pivotal player in the world economy due to its alarmingly high government debt. In the coming months, German Chancellor Angela Merkel and French President Nicolas Sarkozy will decide the fate of not only Greece and the European economic policy, but quite possibly the economic recovery of the United States as well.
If Greece defaults, every major bank and investor in Europe and the U.S will lose billions of dollars, with the most devastating losses originating from the ownership of junk Greek bonds. Everyone from trained economists to the local gas attendant should be watching the decisions coming from Europe closely, as this crisis has the potential to affect every aspect of our lives, just as much as it does our counterparts in Europe.
While some maintain that we should concentrate on our own economic problems and not those within Europe, we cannot simply pretend and hope that the problems abroad will not spread. Greece, and the domino effect its debt crisis is having on the rest of Europe, is the perfect example of that.
The economies of the European Union are tightly interconnected, and once the Greek debt reached a point of no return last year, European leaders were forced to agree on a $140 billion bailout for Greece. After a year of failed austerity measures and countrywide strikes, Greece still cannot fulfill its debt commitments, and the EU is being forced to implement the rest of the enormous bailout. The fear is now that countries with similarly high debt, such as Italy and Portugal, will require massive bailouts in the future, and how the EU is prepared to handle it has come into question.
Two of the EU’s largest economies, Germany and France, are proposing fundamental changes to the EU's monetary agreement in order to be better prepared for future debt bailouts. Merkel and Sarzoky will be working for the next few months to establish a pact on closer economic policy and tougher sanctions for EU countries that run excessive deficits and a high amount of public debt. Part of this pact could include a controversial financial transaction tax within the European community, which is strongly opposed by both Britain and the U.S.
Although problems within Greece and a currency we do not use may seem inconsequential, in an economy without borders, the U.S. cannot afford another wide-scale economic crisis. Whether it starts small with fewer exports to Europe; higher trading taxes; rising import prices for goods and services, such as food, clothing, even oil prices; and especially a default within the European banking system, the U.S is extremely vulnerable to whatever decisions are made regarding Greece and the European Union in the coming months.
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