Is Europe’s Debt Crisis any of our business?

Yvonne writes:

I have been trying to keep up with the economic situation that the Europe is facing. While it started with Greece, other European countries such as Spain and Italy are also facing economic hardship. As I was reading the following article from USA today, there was one major point that came to mind: What business does the Obama Administration have to pressure Europe to “resolve this crisis before it gets worse”? It is apparent that the U.S. is no model in economic stability or low unemployment rate and it really portrays weakness as a nation to talk about something that we have yet to master 3 years after a recession. With that said, it seems like Europe is making strides to overcome this crisis.

While I understand that the Obama administration is worried that by the European crisis getting worse, it could in turn impact the American economy greatly, I do not believe it is the U.S.’ place to voice those kinds of concerns when the rest of the world has concerns about our economy and how we affect them. We need to start thinking about the things our government can do so that businesses stay in this country instead of relying so heavily on other countries for their exports, etc.

http://www.usatoday.com/money/world/story/2011-10-27/eurozone-crisis-deal/50963370/1

Advertisements

About Mark P. Holtzman

Chair of Accounting Department at Seton Hall University. PhD from The University of Texas at Austin. Worked at Deloitte's New York Office. BSBA from Hofstra University.

2 comments

  1. The US has enjoyed better economic times, but unlike Europe, we are nowhere near the verge of collapse. I think the Europeans can learn a lot from the US, and especially from our model for NAFTA, which creates a free-trade zone with fewer regulations than the EU/Eurozone.

  2. I actually see nothing wrong with the US intervening in the European debt crisis, since European leaders cannot even agree even on the most basic level about anything. Regardless of whether the US economic model is broken or flawed, one cannot ignore the fact that when a bailout was needed in the US back in ’08, the Fed and Treasury put together a bailout package in a matter of days, as opposed to European leaders, who have been toying with the idea for months now.Since US investors and states hold billions of dollars in Greek bonds, I think the US is more than entitled to voice their concerns and suggests solutions to European leaders. This is the problem with a globalized economy and with owning sovereign debt, especially debt from nations with shady accounting such as Greece which makes whatever credit ratings they had at one point virtually useless. Since the US would get affected either directly (by a Greek default), or indirectly (The Greeks default and causes a financial contagion), I think the US is entitled to intervene.I think there are three reasons why European leaders “can’t” seem to get their business together. A)Despite all of them being European citizens, European nations have very different mentalities and priorities, which is reflected in their leaders’ action. The idea that they can all work together for a common greater economic good is intrinsically flawed because of these differences.B)It’s extremely unpopular and a political suicide for a government to bail out an institution, so imagine bailing out another nation. Merkel, Sarcozy, and Cameron know this, and it’s reflected in the lethargy of their actions.C) At the end of the day, nobody wants to be the last person holding the bag. Germany is trying to have every nation chip in, rather than just finance the whole bailout themselves. Here are some final thoughts:I personally think that the European Union was never a good idea. A country like Greece for example, adds minimally to the European economy, yet were it to default, it could potentially bring calamity to European markets. It’s like adding a teaspoon of cyanide to a pool, despite adding very little in terms of volume and value, it potentially poisons the entire pool.Looking back at the effect that some countries’ default had – such as Russia and Argentina, which much greater economies than that of Greece- we can see that although they disrupt the markets, they wouldn’t have the same impact that Greece would have on Europe, and by extension, on the global financial markets.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: