A Greek tragedy: How the debt crisis spread like a virus in 'Contagion'
Experts are worried about whether the Greek economy may flatline.
September 19th, 2011
02:08 PM ET

A Greek tragedy: How the debt crisis spread like a virus in 'Contagion'

A look at the plot of the No. 1 film at the box office, “Contagion,” shows a striking thematic resemblance to the debt crisis in Greece.

“’Contagion’ follows the rapid progression of a virus that kills within days. As the epidemic grows, the worldwide medical community races to find a cure and control the panic that spreads faster than the virus itself.” That’s what the film’s website says.

So how exactly does that relate to Greece, you ask?

In a theoretical movie that followed the "Contagion" effect in Greece, the plot would follow the rapid progression of debt that is crippling economies. As the debt drives up interest rates and sends financial markets plunging, the worldwide political and financial communities race to find the public money to stabilize markets and control the financial panic that spreads faster than the debt itself.

More than a year ago, Michael Shuman, writing on Time.com, told how this script played out in the Asian financial crisis of 1997, and how Greece might be the latest sequel.

That is in part because the crisis in Europe has turned into an epidemic of sorts as it spreads from country to country. It's left the European Union struggling and the eurozone's financial health hanging in the balance, and it threatens prospects for a U.S. recovery if the global economy is in shambles. Which is part of the reason that U.S. Treasury Secretary Timothy Geithner huddled with European finance ministers in search of a way out of the debt crisis.

And it's not just a financial crisis that's spreading. It's the fear too.  In the same way that riots in England have been blamed on economic hardships, reports out of Greece show the once carefree residents are getting "more depressed by the day" with depression and suicide rates growing.

Can an answer be found in time?

"Time is running out."

That simple statement encapsulates a sense of urgency and fear regarding the Greek debt crisis and the larger implications for Europe's economy as well as the global economy.

It came from Marc Chandler, the global head of currency strategy for Brown Brothers Harriman, after meetings between European finance ministers "ended without substantial progress" this weekend.

For months now there have been talks about how to bail out Greece specifically, as well as how to deal with the crisis spreading to core members of the European Union.

The big question is, will time run out before the international community can find an answer? The big fear is that it will.

The Europe default risk signal is flashing bright red. It's the equivalent of the Centers for Disease Control signaling a disease is spreading and needs to be contained - quickly.

A lot of countries are in trouble, but Greece leads the way. Experts say the probability that Greece will default on its $345 billion in debt is just about 100%.

What's being done to avoid a global economic crisis?

Greece was given a second bailout on July 21, amid concerns that Greece's default would spiral into a financial crisis within the eurozone. The plan was to restructure Greece's crippling debt.

The plan was dubbed Greece Bailout version 2.0. But can it work?

"There is no solution to the Euroland's sovereign debt crisis in sight," Carl Weinberg, an economist at High Frequency Economics, told CNNMoney.com. "Markets will continue to be fundamentally unstable and volatile as long as we can think."

The European Union recently touted a new aid package, which officials said will cover all of Greece's financing needs.

Tu Packard, a senior economist at Moody's Analytics, told CNNMoney.com that the plans should go a long way toward making Greece's debt burden sustainable and contain the threat of debt contagion. "People are interested in a realistic path forward," she said. "And until now, there wasn't clarity."

The news of a new aid package  followed some extensive delays in decisions that many said made the crisis worse.

Douglas McWilliams, founder and chief executive of the Centre for Economic and Business Research, one of Europe's leading economics consultancies, said that if European leaders don't act decisively by restructuring the euro and European debt within a month, the markets will force it on them.

"Failure to act would mean riots, bank collapses and would set back economies for a decade or more," McWilliams wrote in a column for CNN. "For too long, economically illiterate politicians have tried to deal with Europe's economic and financial problems by covering them with ever thicker layers of sticking plaster."

There have also been calls for a bond backed by all 17 countries in the eurozone - and those calls have been growing louder as things have gotten worse.

But German Chancellor Angela Merkel believes euro bonds are the "absolutely wrong" way to defuse the crisis.

"Euro bonds are politically unworkable," Michael Hewson, an analyst at CMC Markets in London, told CNNMoney.com. "They would need to be ratified in all 17 eurozone states, and without Merkel's support, that's literally impossible."

So what is possible?

We don't know. It's the worst kind of waiting game, one where we wait and see if Europe's economy flatlines.

What are the implications?

Greece is quite simply running out of money.  The EU is struggling to provide life support to the entire continent while trying to quarantine each individual situation.

The best hope will come on September 29 when the German Parliament will vote on the second Greek bailout and the stability fund overhaul.

If that doesn't work, there is a possibility of a major default, which would likely cause the virus to cross Greek borders.

As the collapse of the Lehman Brothers financial services firm set off the 2008 U.S economic crisis, some say Greece has the potential to set off a similar chain reaction. George Soros, billionaire hedge-fund investor, said the impact has the potential to be a lot worse.

There are concerns that things are so bad, even if Greece is spared, there likely won't be enough left over to help other countries in need of aid.

In keeping with the "Contagion" metaphor, there may only be enough vaccines to save some, but not all economies.

If this is indeed the end game for Greece, as some have speculated, the question then is: How many casualties will there be before a cure for the economic crisis is found?

As for the long-term solution: Consider how the CDC would have to work with the World Health Organization to stop an epidemic and whether that is the right structure.

The same idea applies to the debt crisis. Has this contagion shown us there needs to be a dramatic change of structure across Europe, including restructuring the EU itself?

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Filed under: Economy • Greece
soundoff (102 Responses)
  1. Pat

    Some key points:
    (1) There is no "Greek debt"; there is only Euro debt. The Euro is a fiat currency; all EU members effectively pooled their debt/assets when they abandoned independent currencies and fiscal autonomy.
    (2) Euro bonds are the only orderly resolution. The simplest option to the overall Euro debt problem will be to simply print more Euros, and the only orderly path for that is bond issuance.

    September 19, 2011 at 4:53 pm | Report abuse |
    • JKMU

      The mess now with Greece is concerning the option of having a war or close to that with Turkey. Turkey prime minister, Mr Erdogan has said 2 days ago that Turkey will make its presence felt in the eastern Mediterranean Sea and use its capabilities at a time when Greece and Cyprus are looking to exploit recently discovered gas fields off its coasts and partner with Israel to build energy facilities. Turkey, which does not recognize Cyprus's Greek government (Turkey occupy large part of Cyprus in the 70’s in a brutal operation), has bitterly complained about recent Cyprus-Israeli energy deals. This huge natural gas fields have the potential to save Greece from its economic disaster situation…but the Turks like to take it by force and the western world does neither help the Greeks nor the Cyprus's Greek government!

      September 19, 2011 at 6:05 pm | Report abuse |
  2. The mad turk

    Damn Greeks..

    September 19, 2011 at 5:16 pm | Report abuse |
  3. sdjim

    If you'd like to see a parallel to the financial woes of the world and US policy, look at the years 1937-38. By 1937 the US was coming out of the 'depression' because Roosevelt realized that to get out of the financial mess caused by the Robber Barons (today hedge fund managers, banks, & Wall Street), there had to be jobs created to increase consumption. WPA & CCC programs (Obama's stimulus package today) were the remedy. But in 1937, funding was severely cut and the depression was worse than ever (today the Republicans eagerness to cut, cut, and cut some more). In fact the word 'recession' was used for the first time; politically, you couldn't have a depression within a depression. We all know how the depression ended, WWII. Like it or not Obama is the only adult talking now. there has to be an infusion of a stimulus paired with additional revenue. If the Republican cut, cut, and cut wins out, where are the jobs for everyone that has lost their jobs in local, state, and federal government. Hope this all makes some sense.

    September 19, 2011 at 5:18 pm | Report abuse |
    • Virginia Nightengail

      Are you NUTS??? Obumma can stimulate all he wants to but deadbeats and parasites will still be deadbeats and parasites! Unions still want to suck the blood out of everyoneand the administration will still want to print and borrow more and more money which will cause more and more debt! Once all the money is taken away from the blasted "rich", where's it going to come from, Bub? Clear and concise, indeed!

      September 19, 2011 at 6:10 pm | Report abuse |
  4. banasy©

    Thank you, sdjim.
    Clear and concise.

    September 19, 2011 at 5:26 pm | Report abuse |
  5. dennis

    reduce the price of overprice houses in california so people can afford a home again to stimulate the economy. the government will get more taxes and jobs will be created so stop the greedy real estate people. the housing market is the hearth of the economy

    September 19, 2011 at 5:32 pm | Report abuse |
    • joey2shoes

      You are correct that the housing market is a huge part of our economy, but decreasing home prices as you say can not happen by someone saying, "All houses are 50% off". Not only is it impossible unless current home owners want to take a big loss or banks want to clean out their debt on forclosed properties which they pretty much are already doing, if it were possible, it would make alot of others investments in thier homes worth much much less. We need get rid of alot of the BS regulations on businesses, get them back into the USA, and get a program in place to "HELP" the small businesses. Too many small businesses are going out of business. Stop helping the big businesses and keep the little guys going. They are the ones with the jobs and they are the ones that will pull us out of this mess. SMALL BUSINESSES should be our first priority! Bringing large businesses back into the USA should be #2.

      September 19, 2011 at 5:50 pm | Report abuse |
  6. Voltairine

    On Youtube see:
    RSA Animate – Crises of Capitalism – David Harvey
    Capitalism Hits the Fan – Richard Wolff

    September 19, 2011 at 5:41 pm | Report abuse |
  7. Jordan

    We'll juts like in the movie you have to identify the source, test the model and then distribute the solution. Failure to do this only exacerbates the problem.

    September 19, 2011 at 5:42 pm | Report abuse |
  8. Archie de Bunker

    All this is being said about Greece, and certainly the situation is dire. Why is no one mentioning the fact that, while Greece's debt is 15 times their GNP, the US's debt is 17 times our GNP!! Anyone heard of "The Elephant in the Room? And, sdjim, you're exactly the kind of non-thinker that has caused us to be in this situation. Obama is NOT an "adult" in the sense you mean – he is speaking in the typical talk of Socialists (Democrats) everywhere who will choose ANY solution except one that means the bloated Federal Government has to trimmed back. And the bloated Federal Govermnet and runaway social spending are the "Robber Barons" you refer to. The waste and unnecessary spending and outright corruption in the Federal Government, especially the Obamanation Administration, so far out-strips that of banks, hedge funds and Wall Street. Take a look at the facts. Obama took office when the country and the world were in dire financial straits. What was one of his first actions? To start hiring THOUSANDS of new Federal Workers, each of whose salary and benefits far exceeds $100,000. How did that demonstrate his concern about the U. S.'s financial situation? Then, instead of concentrating on the economy and the debt problems, he and his idiots pushed through a Socialized Medicine program that is going to cost far, far more than even the wildest estimates of its opponents warned us about. In order for Obamacare to be imposed, there will have to be almost a hundred new government "panels" or "offices" or what ever you call them, set up to "administer" the mess. Each one of those will require hundreds and hundreds of new $100,000 plus (it's the law, you know) in salaries and benefits. How does that demonstrate his "adultness?" Right now, the average salary of a Federal Government employee is at least twice what a worker in industry doing comparable work makes. And Obama has encouraged them to unionize, and helped fix the laws so that if we were to do what needs to be done and cut the salarys of Federal Government employees by 50%, the courts would rule against it, and we'd have to keep paying the do-nothings at the same rate they get now. Yeah, that's real "adult," right?

    No, we don't need ANY new taxes. We need the size of the government to be reduced by at least 50%. As for the people who get laid off, they were not helping the economy anyway. Let them go and compete for one of the jobs now held by illegal aliens!

    September 19, 2011 at 5:45 pm | Report abuse |
    • Virginia Nightengail

      Kudos to you, Archie! You are right on the money (no pun intended)!

      September 19, 2011 at 6:09 pm | Report abuse |
    • Camper

      Lets see...
      You do not know what socialism is, several made-up statistics,
      Random capitalized words, quotes around various nouns...failure to cite any republican actions through 2000-2008 as contributors to the current situation, turning a story about a foreign sovereign nation's economy into a rant about Obama..

      Yep, smells like a Fox News* viewer to me!

      September 19, 2011 at 6:28 pm | Report abuse |
  9. wendy5

    they will default matter of when not if; the US should worry about its turn; what obozo did today was loose more jobs and raise prices how do you think employers will pay for this little stunt of his; tax the rich more is so he can pay his people unemployment ; it will not help the deficit sitution at all; he has to stop spending ; more jobs and money will go to asia now who would want to start or expand a business in this envirornment anyway ;but thats why his name is bozo; he has no clue as to what he is even doing he is not an econonmist he begs for money 2 very different things and he should no if you threaten people and the money they earned well what would you do with your money. i think the market is in a bear market for a long time to come

    September 19, 2011 at 5:46 pm | Report abuse |
  10. doug

    i don't think its a crisis, nor is it a disease. If you can't pay your bills you cant pay them. Globalism is affecting the stockmarkets. 80% of americans still have jobs, are still buying houses, cars, burgers. The economy still exist. Debt is just a tool to be managed. Greece due to corruption should go under, its simply a reality that if you default on your loan you don't get more money, your bankrupt, pure and simple.

    September 19, 2011 at 5:47 pm | Report abuse |
  11. pulsars

    Simple solution: Amputation. If a person has a gangrenous foot, you remove it to save the person. Any country that is too debt ridden to function should be financially quarantined/amputated from other countries. Seems cold-hearted but it prevents other countries from being dragged down as well.

    September 19, 2011 at 5:49 pm | Report abuse |
  12. government cheese

    Why do liberals relate everything to movies like the movie is real?

    September 19, 2011 at 5:51 pm | Report abuse |
    • rayman

      You have to read Ann Coulter's new book, "Demonic," where she explains liberals' attraction to chants, slogans, and whimsical ideas.

      September 19, 2011 at 6:23 pm | Report abuse |
  13. Kevin

    Everything that's playing out today was obviously headed our way 2 years ago. Obama's best medicine back then was TARP, Cash for Clunkers, a trillion dollars thrown at things we didn't really need, 2 years of cash for the unemployed, and other short-term thinking applied against long term structural problems. Now what options are left? Does anyone think that more of the same is part of the solution?

    September 19, 2011 at 5:53 pm | Report abuse |
    • D2

      Cash for Clunkers and TARP are Bush not Obama

      September 19, 2011 at 6:37 pm | Report abuse |
  14. swayzee

    Hate to say you'll but while the US and other countries head toward financial meltdown lockdown, a new power that waited in the wings and watched for centuries will rise...China..today, they are more smarter and work harder than almost every country these days. They will work for scraps to build a mansion meanwhile a lot of us get frustrated in the US and other places when we can't find the remote to our TVs and have to turn channels manually..etc..etc..either we wake up soon or take a backseat.

    September 19, 2011 at 6:14 pm | Report abuse |
  15. atinks

    Anyone remember the Maya calender depiction of a world in peril in 2012? it looks like no one can read the signs anymore. repent people and stop worshiping false gods. the gods of money are letting us down.

    September 19, 2011 at 6:22 pm | Report abuse |
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