US crisis reaching Greek shores

In Brussels on Tuesday, the European Union’s 27 finance ministers, after listening to the views of Economic and Monetary Affairs Commissioner Joaquin Almunia, expressed the opinion that Europe will not be appreciably affected by problems in other parts of the world, notably the United States. In other words, the message is that the crisis in the US subprime loans market, which has evolved into a broad credit crisis with victims throughout the banking system, is gradually spreading to the real economy, causing a slowdown in the growth rate of the American economy. And although it may be that with the growth of the Asian economies, the old adage, «when America coughs Europe catches the flu,» may no longer be apt, the fact is that the US slowdown is being quickly transmitted to Europe, since the big, US-based, multinational banks that were exposed to the subprime market had extensive ties with European banks. To date, neither Greek Economy and Finance Minister Giorgos Alogoskoufis nor any other government official have given any clues about the possible repercussions on this country of the crisis which is spreading across the world. Some of them seem to believe that Greece may not be adversely affected. However, the European Commission takes a different view, as shown in the growth and inflation figures contained in its autumn forecast report for 2008, presented in the adjacent table. As the table shows, the slowdown in the US appears to be decelerating the growth rate in the eurozone countries, where it is projected to fall from 2.6 percent this year to 2.2 percent in 2008. Greece is also being affected, its growth rate seen falling from 4.1 percent in 2007 to 3.8 percent next year. As many may consider this forecast unduly pessimistic, we may note that downbeat signals have already been issued by Greek sources themselves, for example the National Statistics Service, which said that the growth rate in the third quarter fell to 3.6 percent from 4.1 percent and 4.6 percent in the previous two quarters. Being in the eurozone, it would have been very odd if our exports and tourism had not felt the pinch of the strong euro.