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The Greek Fiscal Crisis and the U.S.

February 26, 2010

The Greek financial crisis has been in the news a lot recently such as articles about Greek workers protesting the austerity plan.   It is now also becoming clear that a strong American tie exists.  American firms apparently had a hand in the crisis, as it now appears that Greece had arranged credit default swaps with American banks, such as Goldman Sachs.  It seems that Greece was hiding its debt, as its national debt needed to be below 60% of GDP for Greece to join the euro in 2000.  The U.S. Federal Reserve has now reported that it will investigate this deal.

This morning NPR ran a story about how the Greek financial crisis could directly affect the United States. The Greek financial crisis has been weakening the euro, and while this might be good for American tourists, it is not necessarily good for American exporters.  Products produced in the Eurozone are now cheaper on the world market, since it takes fewer dollars to buy something priced in euros than it did a month ago.  More importantly, the article’s main argument is that that if EU members are forced to spend money bailing out the Greeks, European governments from spending money on issues important to the U.S., such as defense (let alone programs popular among European voters).    As the U.S. looks to Europe as a strategic partner, this budget crisis may really hinder Europe’s effort to be more important in the world.

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