Business

If Greece Defaults…

European economies are bracing themselves for the prospect of Greece defaulting on its debts. What will a Greek bankruptcy mean to the U.S. economy?

Main building of the bank of GreeceU.S. banks have little direct exposure to the Greek economy, only about $5 billion.  The problem is indirect exposure. European banks, particularly those in Germany and France, own large amounts of Greek government debt, which will become worthless if Athens defaults.

“Immediately, there would be a credit crunch.”

Tu Packard is a senior economist with Moody Analytics. She says that European policy makers, particularly central bankers, would need to intervene in a big way to keep such banks afloat. If they fail, the U.S. will have a much bigger problem on its hands.

“U.S. exposure to European banks is over $3.4 trillion, so it’s over 60% of U.S. exposure to the whole world.”

A credit crunch on that scale could easily dry up global trade financing, as happened in the wake of the 2008 financial meltdown. That means Houston would take a beating.

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Andrew Schneider

Andrew Schneider

Politics and Government Reporter

Andrew heads Houston Public Media’s coverage of national, state, and local elections. He also reports on major policy issues before the Texas delegations in the U.S. House and Senate, as well as the Texas governorship, the state legislature, and county and city governments. Before taking up his current post, Andrew...

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