World financial crisis looms after Greek default

As bad as Americans feel about their current economic situation, they can take heart that it's nowhere near the difficulty Greece must confront. Already having adopted draconian cuts to government programs and services, the government is now looking to sell off shares or outright privatize several government holdings such as banks, railways, airports, and utility firms. Even gaming licenses are being considered as a means of saving the economy. A failure could drag Europe, and the rest of the world, into recession.

LOS ANGELES, CA (Catholic Online) - Recent deep government cuts and high unemployment, combined with tax increases, have many people taking to the streets in protest. The government itself cannot agree on how best to proceed and international help is stymied by an impasse between Germany and the rest of the European community.

The Greek state has already been downgraded to the next-to-lowest level of creditworthiness (CCC) and risks being downgraded to a "D" meaning default by Standard and Poor's (S&P). Greece is currently the only country in the world with such an abysmally low credit rating. 

The crisis was largely fueled by many years of unregulated economic activity, particularly in the government and financial sectors. Unrestrained government spending and risky financial practices made Greece particularly vulnerable when the financial crisis hit in 2008.

The initial crisis was so bad that the European Union delivered a $145 billion bailout package to Greece 18 months ago. Now, they are looking at an additional $170 billion.  

Unfortunately for Greece, and possibly much of the world, the members of the EU cannot agree on the terms of the bailout. Germany is the key factor in the impasse, suggesting that private investors also be responsible for repayment of some of the debt, a move that many oppose because they believe it will drive away what little investment Greece has left. The clock is ticking. If the package is not approved in time, and it is becoming increasingly apparent this will be the case, Greece will default in mid-July.  

If Greece defaults, the impact could be felt worldwide. Certainly the European banking sector will suffer greatly and investors could panic again as they did with Lehman Brothers Bank in 2008. Such an occurrence could put the entire European Union into the red, and thus affect the entire world economy. At a minimum, the Euro is expected to fall against the US dollar and other currencies.  

For now, as the Europeans protest and debate, the rest of the world is left to watch and hope that Greece will not lead Europe and possibly the rest of the world, into another economic crisis.  

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