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Sunday, June 19, 2011

Shall Greece debt crisis lead the world economy into recession?

A couple of day’s back renowned rating agency S&P downgraded Greece’s credit rating by 3 levels –from B to CCC, CCC is just 4 level higher than default D.
Moody’s, another esteem rating agency, has also done the similar.
Greece’s debt has become $ 481.5 billion, and thus making debt restructuring indispensible.

Former fed chairman Alan Greenspan had also expressed concerns over Greece’s debt and according to him Greece shall default for sure and this could drive US economy into recession.
On August 2nd, 2011 US treasury department shall exhaust its borrowing authority and debt ceiling need to be raised.US is emphasizing on increasing higher export to cut its trade deficit and Greece’s default shall impact its export by making dollar strong against Euro which shall hurt US exporters.Apart from this demand from Europe for US goods shall decrease .US government needs newer debt till it continues to run budget deficit. Lower export shall result in more deficits.
Greece bond yields had risen by 30% for the first time thus indicating how severely Greece bond price have fallen.People in Athens, the Greek capital, are protesting against wage reduction and tax increment.
Euro zone Chief Jean Juncker has warned contagion effect arising from Greece debt crisis to countries like Italy, Belgium, Portugal and Ireland.
If Greece debt is not restructured this could play as Lehman brothers failure in 2008 which led the world economy into recession.World economy has already been threatened with US debt, Chinese slowdown and Greece debt shall add more woes to it.

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