Theme:”Why the events in Greece have such an impact on the World Economy”

There are different responses to this question. Some view a Greek default as a doomsday scenario for America. “If Greece is just unable to pay its debts, we are going to see finance suddenly freeze up,” said Gus Faucher, an economist at Moody's Analytics, a research firm.” We are going to see huge drops in stock prices. Firms are going to get very cautious, very anxious again. They're going to lay people off. It's going to be very similar to what we saw in late 2008, early 2009, on top of what we already had. So it would be really disastrous for the American economy.”

However, not everyone is convinced that Greece matters a great deal to the U.S. Former IMF chief economist Raghuram Rajan has said, “If it (the debt restructuring) happens in a way that banks and markets are prepared for, even if not publicly but at least privately, it is very well containable.”

Whatever the eventual outcome of Greece’s debt crisis, the current interconnectedness of the world financial system means that credit events in Europe—and other disruptions in financial markets throughout the world—will continue to have potentially disruptive consequences for the American economy. While American policymakers do not have much direct influence on events in Europe, they need to remain vigilant about the challenges that the interconnected financial system continues to pose for a strong American economic recovery.

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