Should Greece Leave the Eurozone? >
The Costs of Greece Leaving the Euro Could Be Very High
The prospect of Europe's debt crisis spilling over to the United States is threatening
May 16, 2012
About Sabina Dewan:
Sabina Dewan is the director of Globalization and International Employment at the Center for American Progress.
It is hard to imagine that the economic crisis in small country like Greece that is just over 2 percent of the Eurozone's gross domestic product is generating shock waves big enough to destabilize the region. Today, politicians, pundits and the public in Europe are talking about the possibility of Greece leaving the euro and returning to the drachma.
What seemed like an inconceivable idea just a few months ago, today seems almost inevitable, but the costs of Greece leaving the euro could be very high.
[See pictures of the EU in crisis.]
"The spillover effects, the chain of consequences that could result from that [Greek euro exit] are very difficult to assess," Christine Lagarde, Managing Director of the International Monetary Fund told the press. "We can certainly assume that it would be quite messy."
Continued economic and political turmoil in Greece is generating great market volatility, wreaking havoc in bond markets and continuing to weaken growth prospects in the region. Greece's exit from the Euro could exacerbate these trends increasing the potential need for further bailouts for Spain for example.
The prospect of Europe's deepening sovereign debt crisis spilling over to the United States through exchange rates, trade and financial channels is also threatening.
[See a collection of political cartoons on the European debt crisis.]
Greece's continued failure to implement the harsh austerity measures imposed upon it by its creditors is making it hard for the creditors to continue to provide support. But Greece's non-compliance with this austerity agenda should not come as a surprise—the agenda was never politically or socially viable in Greece in the first place.
But where to from here? Europe and the Greeks themselves have to decide whether the costs of the bailouts are a worthy trade-off against Greece's inevitably messy withdrawal from the Eurozone.
- Join the debate on Facebook.
- Follow U.S. News Debate Club on Twitter.
- Check out U.S. News Weekly: an insider's guide to politics and policy.
- Other Arguments
-
#16737
No — Rather than leave the eurozone, Greece should seize the opportunity to make real changes
KENT HUGHES, Director of the Program on America and the Global Economy at the Woodrow Wilson Center
-
#26139
No — Greece must stay in the eurozone until its exit would cause less damage than it would now
SCHEHERAZADE REHMAN, Professor at George Washington University
-
#36241
Yes — If Greece doesn't leave voluntarily, Europe should expel it
MAURICE MCTIGUE, Vice President of the Mercatus Center at George Mason University
-
#43418
Yes — Greece has to leave the eurozone for the benefit of its own citizens
JOHN KALLIANIOTIS, Professor at the University of Scranton and a Native of Greece
-
#53021
Yes — Greek voters have rejected the German-imposed austerity, making a eurozone exit likely
EDWARD HARRISON, Founder of CreditWritedowns.com
-
#63325
Yes — It is next to impossible for the Greek economy to recover within the eurozone
ERIC LANGENBACHER, Visiting Assistant Professor at Georgetown University
-
#72928
No — Leaving the eurozone would be catastrophic for Greece and dangerous for the global economy
MICHAEL ARGHYROU, Senior Lecturer at Cardiff Business School
-
#82225
No — Europe would have a failed state on its hands
ALEXEI MONSARRAT, Director of the Atlantic Council Global Business & Economics Program
