Top Ten Reasons Why America Needs to Care About Greece’s Crisis
July 8, 2012
Marcela De Vivo
It has become well-known that Greece is in a state of economic difficulty. In fact, it is estimated that the government debt is at 125% and steadily rising. However, since Greece is thousands of miles away, why should Americans worry about the complications that Greece is facing regarding their budget? There is no simple answer, as there are numerous reasons that should alarm us about the predicament in Greece. Let’s deliberate the top ten reasons why Americans should not disregard that fact that we may be facing a very serious crisis.
Everything tends to revolve around Wall Street. In fact, since many Americans are becoming worried about the Greek crisis, stocks have started to slip. As time goes on and Greece continues to face hardship, the stock market continues to fall at an alarming rate. Simply put, a large majority of investors are worried about the huge debt that Greece has accumulated and are not investing in stocks.
What if this problem spreads to other countries? For example, Spain could be the next likely culprit to be faced with a large budget problem. Americans could be faced with disaster. Europe happens to be one of America’s largest trading partners; therefore, numerous areas of American economics are affected.
One of the biggest uncertainties is what will happen if there is not a clear resolution in Greece. Big investors tend to be comforted by the fact that a solution is at hand or that there is an easy fix. With the Euro Zone lacking a unified political system for the sixteen countries that share common currency, this could become a large and never ending dispute.
Slow Economic Growth
If Europe begins to fix the problem at stake by reducing debt, then it is likely that we will experience a slow rate of economic growth. If the demand becomes slow in Europe, it will eventually spread to America and Asia.
The next thing that could happen if economic growth slows is the price of crude oil. If there is a drastic slowdown in the economy, there will be less demand for crude oil. As we are all aware, crude oil has a very high impact on our economic status.
Selling and Trade
As the budget problem in Greece continues, American trade is affected drastically. Corporate profit is reduced and Europeans are no longer willing to purchase our products. If we cannot sell our products to Europe, we will also buy a lot less from China, which in return causes a global effect.
The USA is home to numerous Greek loans. Although Greece itself only has about $16.5 billion in loans, the rest of Europe has over $165 billion in loans at US banks. It is possible that a Greek default could cause a ripple effect that will spread throughout most of Europe. If this happens, America will face huge losses and a lot of unfortunate debt.
If the above events do indeed take place, it is likely that Americans will find themselves in a recession that they cannot overcome. Our debt will likely be greater, but our current interest rates are as low as they can go. Unfortunately, American debt may spiral out of control.
With the spread of globalization it is no longer possible to ignore world affairs. What is happening in Europe affects all of us. Instead of being separate organisms, we are all like parts of a collective, where the actions of one part affect the whole. As a nation we need to be aware of what’s happening in the world, and be prepared for how we are affected.