A Greek Stumble into EU Exit Could Affect US, Experts Fear
A Greek exit from the EU could happen by accident and brew a Europe crisis.
— -- Greece is unlikely to opt out of the European Union according to experts who fear, however, that a "Grexit" could happen by accident and create a global reaction that could reach U.S. shores.
Douglas Elliott of The Brookings Institution says there's little chance of Greece choosing to leave the EU even if the the Greek “anti-austerity” Syriza party wins the Jan. 25 elections.
Close to three-quarters of Greeks felt that the country must stay in the Euro "at all costs," according to a recent poll, though the Syriza party has demanded that European lenders write off a portion of Greece's debt. That demand is in contrast to German Chancellor Angela Merkel's statement that she doesn't want to grant Greece debt relief if that leaves German taxpayers with the bill.
Concern over Greece's economy and its potential impact on the EU has rattled markets around the world.
Greece's left-wing Syriza party has been clear it does not want to stop using the euro, Elliott told ABC News. Syriza does want to renegotiate the terms of its debt and the requirements for austerity imposed by the EU. Greece's European partners also very much want it to keep using the euro.
"That said, there remains a small chance of a 'Grexit' occurring by accident, if Greece and the rest of Europe make a series of missteps as they negotiate new terms for the aid Greece has received," Elliott said.
Greece would suffer very badly in the short term, probably returning temporarily to "Depression-like conditions" with a big rise in unemployment and shrinkage of the economy, Elliott said. The long-term effects are debatable, however.
"There are reasonable economists who believe the long-term benefits for Greece would outweigh the costs, although I do not share this view," Elliott said.
The impact on the U.S. depends "almost entirely" on whether the rest of Europe would be significantly affected by a Greek withdrawal from the euro, Elliott said, because the Greek economy is relatively small.
"Europe appears strong enough to avoid contagion effects, whereby financial crises spread from Greece to weaker European countries such as Portugal," he said.
Still, panic could spread across borders. If that happens and the wider European economy suffers, then Americans could feel the effects by losing exports and jobs, offset in small part by an opportunity for American consumers to buy cheaper European goods or to enjoy discounted European vacations.
"Overall, it is clearly in our interests for Europe to avoid a significant crisis," Elliott said.