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Why should Americans care about the European debt crisis or a potential bailout for Greece?  I mean, Greece is in a whole different continent, right? The European debt crisis affects not only the European Union, but it also affects the U.S.

First, to put things into perspective, think about the bank run (large number of customers withdrawing all their money in fear of the bank becoming insolvent) caused by the failure of Lehman Brothers in 2008.  A Greek default would cause a similar bank run on every government institution in southern Europe.

In the event that Greece can’t pay its debts, Greece will most likely quit the Euro altogether, regain power to print its own money and use inflation as a way out of debt.

On the other hand, to avoid default, a program similar to the Troubled Asset Relief Program, used to bailout Wall Street in 2008, must be used by the European Union (EU). The EU, as a whole, must take control of the finances of southern European countries cutting spending and raising taxes where this is deemed necessary. In order to carry out this action, the EU will need its own revenue stream to eliminate the southern European debt.

What’s the role of the European Union in this crisis?

This means that unelected bureaucrats in Brussels will have to impose:

• Higher taxes all over Europe to support southern European Debt

• Government spending cuts all over Europe (mostly in southern Europe)

• Transfer of southern European debt and Greek debt to all citizens of Europe

In the event that these changes are not made fast, expenses will surely rise while lowering the likelihood that the procrastinated efforts will be successful.

In other words, think of the consequences Americans would have endured if the government did not give auto companies, the Big Three, $24.9 billion in bailout funds to avoid bankruptcy in 2009.  Without these funds, within one calendar year, the 3 plus million layoffs would have sent our economy even further into a recession.

Likewise, if Greece defaults on its debt, it’s likely that the United States won’t be able to avoid getting pulled into an emergency Euro rescue plan.

How is the U.S. affected by the Greek debt crisis?

In 2008, we learned that even the biggest banks can fail.  In 2011, we’re learning that some countries in southern Europe (Greece) are too big to be saved by European action alone.  If this crisis is not solved, it’s likely that funds from the International Monetary Fund won’t be enough to rectify the default.  As a result, the U.S. Treasury will likely become southern Europe’s next resource.

We hope this information helped answer the question of how the Greek debt crisis can affect Americans.

Jonathan Slappey is a writer for Quicken Loans, a company whose clients believe it’s Engineered to Amaze.  Interested in being Amazed by us? Read trusted reviews at our review site.

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