Greece Nears the Precipice, Raising Fear

From The New York Times:

Published: September 19, 2011

Slower economic growth throughout Europe, and probably in the United States. Huge losses by major European banks. Declining stock markets worldwide. A tightening of credit, making it harder for many borrowers to get loans.

As concerns grow that Greece may default on its government debt, economists are starting to map out possible outcomes. While no one knows for certain what will happen, it’s a given that financial crises always have unexpected consequences, and many predict there will be collateral damage.

Because of these fears, Greece is working frantically in concert with other European nations to avoid default, by embracing further austerity measures it has promised in return for more European bailout money to help pay its debts.

But some economists believe default may be inevitable — and that it may actually be better for Greece and, despite a short-term shock to the system, perhaps eventually for Europe as well. They are beginning to wonder whether the consequences of a default or a more radical debt restructuring, dire as they may be, would be no worse for Greece than the miserable path it is currently on.

A default would relieve Greece of paying off a mountain of debt that it cannot afford, no matter how much it continues to cut government spending, which already has caused its economy to shrink.

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One Response to “Greece Nears the Precipice, Raising Fear”

  1. Andrea B. Says:

    As usual the New York times picks an economist who does not think past the next five seconds and present the populist opinion. At least there track record is consistant.

    If Greece defaults and leaves the Eurozone in a kneejerk reaction, instead of in an orderly preplanned manner, that will destroy what is left of the Greek banking sector (not much), which in turn destroys the economies of Bulgaria, Romania, Macedonia, Albania, Bosnia and Montenegro as they use the Greek banking system for Euro finance. Slovakia, Hungary and the Austrian banks would be heavily damaged by such an act doing serious damage to there economies. Germany and France can aborb there large loses, but the UK would have to perform another serious bailout of banks, as they have heavy Balkan exposure in Greece, Macadonia, Bulgaria, Romania, Montenegro, Albania and Slovakia.

    Albania, Montenegro and Macedonia have made major strides in the last few years to sort out the mess in there economies and create stability. All that hard work would dissappear.

    If the Irish can create a plan to pay of there debts and actually get industrial (non-finance) parts of the economy to grow again while winding up there major banks, property developers, financiers, speculators and building companies, so should be Greeks with access to a lot more money than the Irish.

    It is also interesting to note that the countries that would be most heavily effected are those that are allied to the USA through NATO or support the USA no matter what it says, on most issues. An interesting reward for there loyalty, speculation against there economies.

    The fear mongering, knee jerk statements, positioning and stupidity of the various economic commentators and speculators is going to have to be reigned in, before they create an even bigger mess than is occuring at present, with there fear mongering.

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