How Greek debt woes may affect U.S.

Protesters chant slogans against the IMF and the stability pact in front of the EU offices in Athens.

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Kai Ryssdal: We interrupt this regularly scheduled broadcast for a story that we thought we'd seen the last of weeks ago. European statisticians said this morning that the Greek budget deficit is even worse than expected. Kind of amazing, really, that that could be the case because everybody thought it was pretty bad to begin with. In fact, it was fuzzy accounting that set off the whole Greek debt crisis in the first place.

The announcement from Brussels this morning sent both the euro and European stock markets south. Moody's downgraded Greek debt. Again. And Greek negotiators are still trying to work out a rescue package with fellow eurozone members and the International Monetary Fund.

We asked Brett Neely to figure the odds of this Greek tragedy becoming an American one.


BRETT NEELY: Greece has a serious credibility problem says Jacob Kirkegaard at the Peterson Institute for International Economics.

JACOB KIRKEGAARD: It's basically that the Greek government seems to say, "Oh, well, it doesn't matter that we're going to have a little bit higher deficit," but of course markets are saying, "Well, actually, it matters a lot because it means you have even less credibility than you had before."

He says Greece's worsening deficit numbers could mean it will have to ask for even more than the estimated $60 billion it already said it needs. Having swallowed that number, other eurozone governments may not be able to stomach an even larger bailout package.

KIRKEGAARD: The cardinal rule of bailouts is you do not come back and ask for more. You do it once and that's it.

Europe's biggest economy, Germany, is key to a successful bailout. But many Germans feel that Greek politicians have been fiscally irresponsible.

Domenico Lombardi is a former IMF official in Washington and now works for the Brookings Institution. He says if Greece is allowed to go under...

DOMENICO LOMBARDI: There's a risk the Greek crisis is going to spread to other countries of the Euro area.

The U.S. won't be safe either. Europe is our largest trading partner. The Peterson Institute's Kirkegaard says if the crisis spreads, say goodbye to President Obama's goal of doubling American exports within the next five years.

KIRKEGAARD: If you have another systemic banking crisis in Europe, that kind of growth is simply not going to be there and therefore U.S. export growth is not going to be a realistic option.

The worsening crisis has already pushed the euro to a new low against the dollar this year. That makes our goods more expensive for Europeans, which is bad news for many American companies.

In Washington, I'm Brett Neely for Marketplace.

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