rowing concerns that debt-burdened Greece might renege on its financial obligations are rattling global financial markets. This week, the European Union told Greece's Socialist government to keep its austerity program on track — an obligation under a $156 billion package of bailout loans — by doing whatever it takes, including selling government assets. Restructuring the country's debts now would be a "recipe for disaster," warned the European Central Bank's chief economist, because it would "wipe out" banks to whom Greece owes money, which could set off a devastating global chain reaction — much like the one triggered when Lehman Brothers declared bankruptcy in 2008. Is Greece's crisis really that bad?
This could be even worse than Lehman: "Greece could certainly be the next Lehman," says Larry Elliott at The Guardian. In fact, there's a scary likelihood that "a Greek default would pose a threat to the future of the eurozone," and thus to the health of the whole world's economy. That means that the Greek debt crisis actually "has the potential to be worse than Lehman. Much worse."
"Could Greece be the next Lehman Brothers? Yes — and potentially even worse"
A "Lehman moment" is not inevitable: The fears of another "Lehman moment" are genuine, say Hugo Dixon and Neil Unmack at Reuters. But Europe can avoid it. "Restructuring Greece's debt is both desirable and inevitable," but it should only be cut by 40 percent — then Athens will still owe so much that it will have to continue its financial reforms. And Greek banks should get bailouts to keep them afloat. Then the rest of the euro zone should be able to "withstand the tremor."
"How Greece could avoid triggering a Lehman moment"
Take a deep breath. The markets will manage: "The fear of contagion is overblown," says Steven Pearlstein in The Washington Post. Markets have been "pricing in the risk of a Greek debt restructuring for more than a year," while solid euro-zone countries' bonds have been quite stable. People are "calm and rational enough" to distinguish between a basket case and a good investment.
"The problem with IMF’s plan to fix Europe's debt crisis"
THE WEEK'S AUDIOPHILE PODCASTS: LISTEN SMARTER
- Why is American internet so slow?
- 7 ways to be the most interesting person in any room
- What would a U.S.-Russia war look like?
- Colorado’s new ‘drive high, get a DUI’ commercials are actually pretty clever
- What the collapse of the Ming Dynasty can tell us about American decline
- 22 TV shows to watch in 2014
- Who are the real gay marriage bigots?
- Here are the people who want to take a one way trip to Mars
- Sorry Belle Knox, porn still oppresses women
- 10 classic Sesame Street moments we wouldn't show today's kids
Subscribe to the Week