photo: brintam/ BY-NC-SA

According to yahoo and the financial times yesterday, Greece is in the middle of a potentially devastating debt crisis. Years of production and consumption on debt and loose fiscal policy have lead to this huge deficit. Rescue packages have been offered to Greece, but the Greek government has denied them. They instead are looking for different options to somehow find a resolution to the crisis. European officials aren’t too worried about Greece’s debt and have not made much effort at creating a bailout plan. Experts are unsure of which plan of action will be more effective at solving the Greek crisis: let Greece default or bail Greece out. If Greece chooses to default, this will bring uncertainty to investors and lenders regarding the tarnished European borrowing brand, resulting in higher interest rates and borrowing costs among nations all around the world. This loss of confidence can drive investors to withdraw funds quickly from European banks, creating withdrawal shock. Other failing nations can also see this as a chance to default and escape their ever-rising debts and not only affect their economies, but those of the nations surrounding those countries. On the other hand, if European nations somehow come up with a plan to bail Greece out, the effects can be just as bad as defaulting. Bail-outs require large sums of money, which causes inflation. In this case, the euro will decrease, resulting in higher prices sweeping nations like Germany, Spain, France, Italy, and Portugal. The Greek default can ultimately affect the economic state of the United States, making matters even worse in the middle of an economic crisis with a national unemployment rate of over 10 per cent and a skyrocketing American national debt of over 54 trillion dollars. This could hit the United States hard, seeing as how lending money to other countries is our major trade system.