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How Greece's Financial Failure Can Affect America

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How Greece's Financial Failure Can Affect America

Economy

How Greece's Financial Failure Can Affect America

How Greece's Financial Failure Can Affect America

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  • Transcript
A protester holds a banner in front of the Greek Parliament during a peaceful rally in central Athens, May 25, 2011. i

A protester holds a banner in front of the Greek Parliament during a peaceful rally in central Athens, May 25, 2011. Thanassis Stavrakis/ASSOCIATED PRESS hide caption

toggle caption Thanassis Stavrakis/ASSOCIATED PRESS
A protester holds a banner in front of the Greek Parliament during a peaceful rally in central Athens, May 25, 2011.

A protester holds a banner in front of the Greek Parliament during a peaceful rally in central Athens, May 25, 2011.

Thanassis Stavrakis/ASSOCIATED PRESS

Riots erupted this week in Athens over the Greek government's efforts to deal with its huge debt. The government is debating more budget cuts that are meant to satisfy the European Union. The E.U. is arguing over whether to help Greece with a bailout. The E.U. is an important trading partner to the U.S., and financial failure in Greece can have global ramifications. Host Michel Martin discusses these ramifications with Roben Farzad, senior writer at Bloomberg Businessweek.

MICHEL MARTIN, host: I'm Michel Martin, and this is TELL ME MORE from NPR News.

Coming up, we'll talk to the author of a new book that captures - we don't want to say every parent's frustration, maybe many parents' frustration when it's time to put the kids to bed.

But first, you might have seen the scenes of street protests in Greece over austerity measures being proposed to address the economic crisis.

(SOUNDBITE OF PROTESTS)

MARTIN: That sound is from the riots that broke out in Athens over recent efforts by the Greek government to deal with its massive debt problems. The government is debating budget cuts that are meant to satisfy the European Union, which is in turn arguing over whether to help Greece with a bailout worth tens of billions of dollars.

And you might have thought, well, that's really interesting. But what does that have to do with me? It turns out it might. And here to tell us how is Roben Farzad, senior writer at Bloomberg Business Week. Roben, welcome back. Thanks for joining us.

ROBEN FARZAD: Thank you.

MARTIN: First, could you just tell us, how did Greece get to this point?

FARZAD: You know

MARTIN: And how bad is it?

FARZAD: It's bad in that there was a lot of denial that led up into this. You know, five short years ago, everybody thought that Greece and all these countries in Europe were good for the money because they were living under this E.U. halo. French investors were investing in Greek debt. Risk spreads were going down. They're, like, everybody's good for the money because this coalition thing is going pretty darn well.

Then the economy tanks. And then obviously when that happens, you realize that exposes all sorts of book cooking and the like. And Greece has alleged, you know, really cooked the books to kind of make itself look a bit more healthy, like it was taking in more revenue than it actually had.

And this made its government popular there. But when it didn't have the money to pay the unions and to pay the teachers and to pay the public transit workers, suddenly it had an enormous budget deficit and here we are.

MARTIN: So there's already been one bailout, correct?

FARZAD: Yes.

MARTIN: And now they're seeking a second bailout.

FARZAD: Yes. And I think that it shows that I think the entire continent, subcontinent, vastly underestimated how severe this was. I mean, they went to the trough once.

When you do something like this, ideally you want to cordon off the contagion. And it is so bad - the deficit is so huge over there, and the Greek government's promises of austerity were so ill-received by the masses there that suddenly they are facing down the possibility of a default, which is absolutely unthinkable for a country the size of Greece.

MARTIN: So, Roben, the E.U. is obviously an important trading partner to the U.S. How important a trading partner is it and what are the implications of a financial failure in Greece to that relationship?

FARZAD: You know, the United States in this position at the time where it's especially dependent on exports, whatever we still do export, because the U.S. consumer is so weak, can ill-afford to have Europe in crisis. Whether, you know, if there's a systemic problem and banks start failing and then you have companies reneging on their orders and whatnot. This is something that we need, like, a bullet in our heads at this point.

So you are hoping that this doesn't recourse back to American manufacturers. And, again, we are all connected. You look at how the Japanese tsunami hurt American manufacturers. They're still blaming it in their financial reports. This could ripple across the pond. If German and French banks are on the hook, suddenly, American banks are on the hook because we trade with all of these multinational banks in Paris and Berlin and in London.

And the whole world likes to think that China's controlling everything right now, but disproportionately the German and French economies are trading partners with us. And we don't want to see them subsumed by some systemic banking crisis that doesn't make them good for the money.

MARTIN: Roben Farzad is the senior writer for Bloomberg Business Week talking to us about the latest in the Greek debt crisis, and he joined us from our bureau in New York. Roben, thanks so much for joining us once again.

FARZAD: My pleasure.

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