Americans are already in deep with the Greek financial crisis because the same banks that were bailed out by citizens have bankrolled Greece, and are vulnerable.
“Citigroup Will “Comfortably Survive” the Events in Greece, Says Top Executive
Comments by Citigroup’s new president should ease investors’ concerns.”
Greece is in trouble due to what?
- Excessive spending on social benefits that are unjustified in a global market
- Unresolvable and insurmountable legacy debt
These are the things that bring down governments and destroy nations. The behavior is cancerous to the economic bodies to which they are attached. The European Union patient wants surgery. Greece refuses to cooperate on the EU’s terms, therefore either Greece will fall out or will be pushed out. However it happens, Greek citizens will bear the brunt among creditors.
When Greek citizens become really angry, that will lead to domestic insurrection and political volatility that will make the nation vulnerable to all sorts of radical exploitation. The scenarios are predictable, and the negative outcomes are preventable, but only when Greeks feel sufficient pain and develop sufficient readiness to find humility and to cooperate.
Any number of nations might want to intervene as Greece is of strategic value. Some of those possibilities include nations that are unfriendly to the west and the U.S. Therefore, the U.S. foreign policy professionals need to engage the situation in cooperation with the EU partners.
Part of the problem at present is that the Greek government is behaving as if it has greater autonomy than it believes and deserves. It has not been sufficiently humbled. External forces cannot rush the process. Greeks must experience pain from their own actions before they can entertain remedy.
What might the remedy include?
- Forfeiture of autonomy
- Forfeiture of assets
- Imposition of external regulations
- Infusion of external investment and control by corporations
June 25, 2015 | Testimony before the Senate Banking Subcommittee on National Security and International Trade and Finance
Recent economic and political developments in Greece suggest that it is only matter of time before that country both defaults on its large public debt and imposes capital controls. Those developments could very well pave the way for Greece’s exit from the Euro within the next twelve months. Were that to occur, one must expect that Greece’s economic and political crisis will deepen, which could lead to that country becoming a failed state.
Europe is in a very much better position today than it was in 2012 to handle the immediate fallout from a Greek exit. However, a number of countries in the European economic periphery continue to experience weak economic growth at a time that they still have very high public and private sector debt levels. This makes them especially vulnerable to swings in investor sentiment once global liquidity conditions are normalized and once the perception becomes widespread that Euro membership is no longer irrevocable.
Learn more about the Greek debt crisis:
Does Europe need debt relief?A tale of two debt crises: Is Puerto Rico America’s Greece?
The implications of a Greek default for the United States are not to be underestimated. Immediate action by the European Central Bank (ECB) to limit contagion to the rest of the European periphery must be expected to further significantly weaken the Euro against the dollar that could have a material impact on the US trade balance. From a longer term perspective, should market financing for a country as highly indebted as Italy dry-up in the wake of a Greek exit, one should expect renewed tensions in global financial markets that could constitute a significant headwind to the US economic recovery. In addition, were Greece to become a failed state, a geopolitical price might be paid in the sense that Russia would have an opportunity to gain a firmer foothold in the Balkans.
A deepening of Greece’s economic and political crisis would further dent the credibility of the IMF, which has provided major financial support to Greece over the past five years and which has consistently underestimated the depth of the Greek economic depression.. It could also result in Greece’s defaulting on the US$24 billion it owes to the IMF, which could have implications for the US taxpayer.”
Via AEI email
See the testimony here: http://www.aei.org/wp-content/uploads/2015/06/Lachman-Testimony-June-2015.pdf