Ripple effects of crisis could reach Americans
The financial crisis in Greece has upended the lives of residents of the Mediterranean nation. The shutdown of the banking system has resulted in long lines at ATMs to withdraw a daily maximum of 60 euros, about $67. Citizens have stockpiled food and fuel, leading to empty shelves at grocery stores and crowded gas stations. It is the worst economic downturn faced by any developed nation since World War II.
But for Main Street USA, the ripple effects are few and far between. Here are three big ways the Greek debt crisis could affect you personally.
1. Your 401(k) could get scary. Markets a round t he world plu nged a f ter negotiat ions broke down late last month between Greece and its European creditors. For those with a 401(k) retirement savings plan, the selloff was a painful reminder of the volatility on Wall Street during the 2008 global financial crisis.
But it didn’t appear to last. U.S. markets regained much of their ground the next day. A recent survey of investors by Barclays found that more than half thought that even a worst-case
scenario in which Greece gets booted from the eurozone would register only as a blip in global markets. Only if the crisis spread badly to other countries such as Portugal and Italy would there be reason for concern.
2. Your vacation could get cheaper. The instability in Europe and the massive stimulus program by the region’s central bank have sent the euro plunging against the dollar. The currency hit a 12-year low of $1.05 in March before inching back up. But it began sliding again in mid-June as the crisis in Greece ramped up.
The good news for Americans is that it means every dollar you’ve saved for that European vacation will go further — and summer is peak tourist season in Greece. Tourism officials have taken great pains to assure vacationers that the home of the Parthenon is open for business, though the U.S. Embassy in Greece released a statement warning visitors to maintain “a high level of security awareness.”
3. Mortgage rates could stay really low. Home buyers have enjoyed low interest rates in the aftermath of the Great Recession, as a weak recovery and Federal Reserve support helped mortgage rates hit record lows, Now the U.S. central bank is consider- ing raising its benchmark interest rate. Many analysts believe it could start hiking the rate as early as September.
But t hat predict ion comes with caveats. Fed officials do not want to cause undue market volatility when it raises rates. They learned that lesson in 2013, the last time they tried to pull back support for the recovery. Back then, the mere whiff of a change in the Fed’s easy-money stance was enough to send stock markets down while mortgage rates shot up by a full percentage point. If Greece is still in turmoil this fall, the future of the eurozone is still in question and markets are exceptionally skittish, the Fed may be reluctant to add more uncertainty to the equation.
Anot her fac tor t h at could give the Fed pause is the strength of the dolla r. Alt hough a st rong dolla r is great for European travel, it ’s bad for U. S. exports. The blow to trade helped stop the American economy’s expansion in its tracks during the first quarter.