May 05, 2010 -- With tens of thousands of protesters jamming the streets of Athens and starting fires today, smoke obscured the Acropolis on the city's skyline. But Europe's political leaders were dealing with a bigger concern -- that the growing economic crisis that led to the protests could put the entire continent's economy under a cloud.
Today the protesters, angered by huge tax hikes and drastic spending cuts, went on a 24-hour strike. Flights to and from Greece were grounded as employees walked off the job. Protestors set the finance ministry ablaze and threw gasoline bombs into a bank. Three people died inside before firefighters could reach them.
The crisis is affecting markets far from the packed streets of Athens, even in the United States. On Wall Street, stocks slipped today over concern that Greece's debt crisis could spread to other European countries.
A number of factors led to Greece's economic disaster. For more than a generation, Greece has been lax over its spending, paying out salaries on the government dime, with huge holiday bonuses.
Many employees were paid as though they'd worked a 14-month year, instead of 12. That extra money gave many Greeks a road to early retirement, for some even in their 50s.
And tax evasion was not only accepted but embraced by much of the population.
Greece says it's getting tough with its economic problems. Greek President George Papandreou pushed harsh spending cuts through, slashing salaries and raising the retirement age to 65. But Greece is still drowning in debt, desperate for a bailout from its European neighbors.
Some of those same neighbors are asking why they should pay for Greece's mismanagement. Though German Chancellor Angela Merkel has promised a financial aid package, the country's largest opposition party said today it won't back the controversial measure.
One economist said today that it would be like the state of Kansas not paying taxes and then, later, asking the rest of the country for a bailout.
Greece Getting Tough With Austerity Package
"It's kind of like everyone in the country saying we have to ante up a few more taxes to what Kansas didn't pay," said Diane Swonk, chief economist at Mesirow Financial. "Everyone in Kansas gets to walk away free."
But now, there is a big bailout package in the works because economists warn that if Greece is not helped, it could drag down the entire European Union, threatening the already-fragile economies of Portugal, Spain and even Italy.
"The fear is a domino effect not only across Europe but into the United States," said Swonk. "If Europe goes down, it's going to affect our economy as well."
In fact, it has already affected the American economy. With Greece's troubles, the Dow has dropped 338 points in just the last week and a half. For the average U.S. investor, that's a loss of about $3,000 in their investment portfolio.
The Associated Press contributed to this report.