Greece's debt issues could trigger a credit crisis and recession in Europe and the U.S. CNN's Lisa Sylvester explains.
TRANSCRIPT
SYLVESTER: In the movie "Contagion," a deadly virus moves rapidly across the world as scientists race to find a cure. That's the stuff of Hollywood, but a different kind of epidemic, a debt crisis, could potentially spread throughout Europe and across the Atlantic to the United States. It starts with Greece, teetering on the edge of default. If that happens, it could spill over to bigger countries in the Eurozone like Italy, whose credit rating was downgraded this week by Standard & Poor's. Spain, Ireland, Portugal and Greece have all had similar downgrades this year. So, you may wonder how this affects you and why you should care.
JOE GAGNON, PETERSON INST. FOR INTERNATIONAL ECONOMICS: A recession in Europe will surely slow the growth rate of America down. It may not cause a recession, but it may feel like it, and it will surely contribute to unemployment.
SYLVESTER: Here's how it could unravel. All signs point to Greece not being able to pay back its 355 billion euros in debt. If Greece defaults, European banks would take a hit. As credit tightens, that could tip Europe into a recession. The European Union is the United States' largest trading partner. If Europeans are buying fewer U.S. goods, that could push the U.S. into recession. Push down the U.S. stock market, American companies would scale back production and you could be left out of a job. Treasury Secretary Timothy Geithner says what is happening in Europe is already undermining confidence in the United States.
TIMOTHY GEITHNER, TREASURY SECRETARY: And we have a huge stake as a country in helping them deal with those challenges. We have a huge economic stake, financial stake, and it is not in the interest of the United States for Europe to be weakened by a protracted economic and financial crisis.
SYLVESTER: The European Union is working on a new aid package for Greece, coupled with new austerity measures, but Greece is quickly running out of two things: cash and time.
