Why America Should Care About the European Debt Crisis?
by The Milton Measure on Friday, June 10th, 2011
On May 18th, 2011, Dominique Strauss Kahn, chief of the International Monetary Fund (IMF), resigned from his position, setting off a series of events across Europe which threatened the already unstable economies of many nations.
The IMF helps negotiate between nations, persuading the more successful to aid those struggling economically. Recently, the IMF has also been heavily involved with Europe’s economic crisis and the unified effort to provide relief to those nations affected.
Without Strauss-Kahn, the mastermind behind the IMF, aid to struggling European nations will be delayed until a new leader is selected.
In response, Prime Minister George Papandreou of Greece acknowledged that his country needs more outside help than anticipated, the S&P 500 warned that Italy could soon face a debt downgrade, Fitch Ratings announced the same of Belgium and stock markets in France, Germany, England, and the U.S. fell sharply.
The question many Americans have in response to these recent events is: how will this affect me? America has its own domestic economic problems: huge government debt and high unemployment rates, amongst other issues. So, should we care about economic problems 3,000 miles away? The answer is yes. We simply cannot afford not to.
Americans should be concerned with the recent economic crises in Europe because it is a warning of what could become of America. Our economic situation, though much less dramatic, is not all that different from that of Greece.
The problem in Greece is that the government that the people envision is more expensive than what they are willing to pay for. Greek people expect politicians to be able to build a government according to their demands without having to pay the
Similarly, in America, the people want healthcare, social security, good schools, a strong army, etc., yet also want to cut taxes. It is impossible for a government to fund all of the programs demanded by the people without taking more of their money. If we continue to demand that the government provide all of these services without raising taxes, America could potentially face the same crisis that Greek government dealing with now.
Another reason the United States should be concerned with Europe’s debt crises is because our current economy is, and always has been, dependent on the economies of nations around the world.
If economies across Europe decline further, the people will not have enough money to spend on American products meaning that money from sales overseas would diminish. Many people do not realize how interdependent economies today are; however, the economic decline in Europe will directly affect our economy, causing America to suffer as well.
Finally, the debt crises in Europe affect Americans because of the contagiousness of fear. When Americans see the effects of the recent events in Europe and realize that the U.S. is not immune to these problems, they will begin to worry about their own money.
People will lose even more trust in America’s economy and government and will stop lending money to the banks. Though individually it makes sense to preserve your own money, this protectionist response will only hurt our economy further, creating a cycle of collapse. Rash attempts to avoid a debt crisis here in the U.S. are more likely to cause an economic crash than help the situation.
For this reason, Americans should care greatly about the debt crises in Europe. Our economy is dependent on the European economy, meaning that if Europe crashes, America will be next in line.
Most importantly, Americans should worry because our current situation is not much better than that of Greece.
Though we are not facing the same magnitude of economic trouble as Greece is today, we very easily could be tomorrow. In light of the recent events in Europe, the United States government needs to create a rigid plan to help us avoid these problems, maintain a steady economy and a plan towards reducing debt.
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