User:Nick Gardner /Sandbox: Difference between revisions
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Default by Greece would create a [[shock (economics)|shock]] to the global financial system, raising a danger of financial [[panic (banking)|panic]], but the amount involved is smaller than was involved in the ''Lehman Brothers'' collapse that triggered the [[crash of 2008|2008 panic]]. | Default by Greece would create a [[shock (economics)|shock]] to the global financial system, raising a danger of financial [[panic (banking)|panic]], but the amount involved is smaller than was involved in the ''Lehman Brothers'' collapse that triggered the [[crash of 2008|2008 panic]]. | ||
The economic impact of the Greek crisis is limited by the relatively small size of its economy. The Spanish economy is much larger, making the possibility of a loss of confidence in its government's debt a greater cause for concern. | The economic impact of the Greek crisis is limited by the relatively small size of its economy. The Spanish economy is much larger, making the possibility of a loss of confidence in its government's debt a greater cause for concern. | ||
Two of them - Greece and Ireland - have been given financial support, conditional upon their adoption of deficit-reduction programmes. In neither case has that been followed by an improvement in their [[Credit rating agency|credit ratings]], suggesting that doubts remained concerning their ability to implement those programmes. Their [[/Addendum#The financial status of the PIIGS countries|current financial status]] remained a matter of concern, on their own account and because of the possibility that the bond market's loss of confidence might spread and affect the fiscal stability of Belgium and other EU countries. It was suggested that the future of the eurozone was at stake<ref>[http://www.bbc.co.uk/blogs/thereporters/gavinhewitt/2010/11/fear_and_the_euro.html Gavin Hewitt ''Fear and the euro'', BBC News, 16 November 2010]</ref><ref>[http://www.ft.com/cms/s/0/58ebec36-62aa-11df-b1d1-00144feab49a.html#axzz16ZvOXbKJ Martin Wolf: ''Eurozone plays "beggar my neighbour"'', Financial Times, May 18 2010]</ref> (even in 2009, before the eurozone crisis had gathered strength, the Managing Director of the International Monetary Fund was warning that "most advanced economies will not accept any more [bailouts]...the political reaction will be very strong, putting some democracies at risk"<ref>[http://business.timesonline.co.uk/tol/business/economics/article6928147.ece Angela Jameson and Elizabeth Judge: ''IMF warns second bailout would "threaten democracy"'', Times, November 23, 2009]</ref>). If the euro were allowed to collapse, however, it has been estimated that reversion to national currencies would be followed by devaluations that would cost British, French and German banks about €360 billion<ref>[http://www.guardian.co.uk/business/marketforceslive/2010/nov/25/banks-lower-euro-worries Arturo de Frias, quoted in the Guardian blog Posted by Nick Fletcher on 25 November 2010]</ref> creating a [[supply shock]] comparable to the collapse of the ''Lehmans Brothers'' bank that had triggered the [[Great Recession]]. | |||
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