Greece’s crisis could undermine euro

Stephen Beard Jan 6, 2010
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Greece’s crisis could undermine euro

Stephen Beard Jan 6, 2010
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TEXT OF INTERVIEW

Bill Radke: Officials from the Europe Union flew to Athens this morning. They’re studying a plan to head off a financial crisis in Greece that could have global repercussions. Let’s bring in Marketplace’s European correspondent, Stephen Beard. Good morning.

Stephen Beard: Hello, Bill.

Radke: Stephen, this is what I don’t get — a lot of governments are having financial troubles. So what is so special about the situation in Greece?

Beard: Greece has a particular problem with its budget deficit because there are big doubts about whether it’s going to be able to reduce it. As we’ve discussed before, Bill, there’s a lot of tax evasion in Greece, so difficult to raise extra tax. And proposed cuts in public spending there have provoked some furious opposition from the public. So markets are not terribly optimistic about Greece’s chances of trimming its deficit, and that’s making it more difficult for the government in Athens to borrow the money it needs.

Radke: Well, Greece is a Eurozone country, is the rest of Europe going to come to its aid?

Beard: Well that is the multibillion-euro question. I mean this morning, one of the European Central Bank’s executive board members said the rest of Europe would not bail out the Greeks, and that immediately hit the value of the euro on currency markets. Because if Greece is allowed to swing in the wind — if in an extreme case it defaulted — that could seriously undermine the euro. And this is where the international repercussions come in. If the euro were to weaken considerably, that could put further upward pressure on the U.S. dollar, and that would not be welcome for the U.S. It would make American exports more expensive and perhaps hamper America’s economic recovery.

Radke: Right. Marketplace’s Stephen Beard there. Thank you.

Beard: OK, Bill.

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