Greece Considering Legal Action Against U.S. Banks for Crisis

According to Bloomberg.com, the Greek government might consider taking legal action against U.S. investment banks for contributing to their debt crisis. Prime Minister George Papandreou spoke out about the issue over the weekend.

“I wouldn’t rule out that this may be a recourse,” Papandreou said, in response to questions about the role of U.S. banks in the crisis, in an interview on CNN’s “Fareed Zakaria GPS.” The program, scheduled for broadcast today, was taped on May 13. Neither Papandreou nor Zakaria mentioned any banks by name.

U.S. stocks fell and the euro slumped on concern that Europe wouldn’t be able to contain the debt crisis stemming from Greece. The Standard & Poor’s 500 Index declined 1.9 percent May 14, while the euro fell below $1.24 for the first time since November 2008.

Papandreou said the decision on whether to go after U.S. banks will be made after a Greek parliamentary investigation into the cause of the crisis.

“Greece will look into the past and see how things went,” Papandreou said. “There are similar investigations going on in other countries and in the United States. This is where I think, yes, the financial sector, I hear the words fraud and lack of transparency. So yes, yes, there is great responsibility here.”

Fed Up, Greece Lists Tax Dodgers

From NY Times.com:

Trying to crack down on rampant tax evasion, the Greek authorities have made good on promises to name — and shame — some of the worst offenders.

The Finance Ministry made public a list of 57 Athens doctors who officials believe are guilty of a variety of tax offenses, including failing to give patients receipts for their fees or even recording the visits.

Twelve of the doctors had reported a combined income of slightly more than $15 million from 2001 to 2008, yet they had deposited more than twice that much — about $39 million — in their bank accounts, the ministry said Thursday.

Experts estimate that the Greek government may be losing as much as $30 billion a year to tax dodgers, a figure that would have gone a long way to solving the nation’s debt problem.

When the authorities audited the tax returns filed by 150 doctors with offices in one of Athens’ most expensive neighborhoods last year, they found that more than half of them were claiming incomes of less than $40,000. Such an income would have made it virtually impossible to pay the rent.

No Greek Tragedy for the Mighty Dollar

From CNNMoney.com:

Now that Greece has finally gotten its bailout, are the days of the strengthening dollar over?

The greenback has gained about 8% against the euro so far this year. Many experts said a lot of this rally had to do with the notion that the dollar was now a much safer haven than the euro in light of the debt problems facing Greece, which is one of the nations that use the euro currency.

So it would be reasonable to think that the euro may finally get back on solid footing. Not so fast.

The dollar gained more ground against the euro Monday morning, the first day after the $146 billion Greek bailout was announced. And the dollar's strong run may not be over yet.

After all, even though it looks like Greece may be able to avoid actually defaulting on its debt; it's not as if the country is now fiscally fit. Plus, the bailout news was not a surprise. There's been speculation about an IMF/EU deal for months.

How Greece's Debt Crisis Affects America

From USNews.com:

Earlier this week, Greek Prime Minister George Papandreou traveled to the United States to promote a message: We're in this together. The debt crisis that has threatened the Greek economy and the stability of the European Union's monetary policies "very much involves America's interests," Papandreou stated in a speech at the Brookings Institution in Washington.

The prime minister—who was born in St. Paul, Minn.—even connected the current crisis to the Great Depression as well as the Great Recession. "If the European crisis metastasizes, it could create a new global financial crisis with implications as grave as the U.S.-originated crisis two years ago," he said.

But the path from a Greek crisis to a U.S. crisis is not a direct one. The European Union is hoping it can contain Greece's debt crisis before the problems spread across the continent—threatening the stability of all countries that use the euro, or the euro zone—and then over the Atlantic.

The crisis began shortly after the election last fall of the new socialist government led by Papandreou. State officials revealed that Greece's budget deficit was at 14 percent of GDP—almost twice what the official Greek government statistics had reported. Two months later, Moody's downgraded Greece's debt to A2, raising the possibility of Greece defaulting on its debt.

If Greece defaults, "it risks exacerbating the economic downturns and could even reignite an acute financial crisis" through higher interest rates, Marc Chandler, global head of currency strategy at investment firm Brown Brothers Harriman, wrote in a report.

How The U.S. Can Avoid the Greek Problem

Greece’s economic troubles have sparked concern among the rest of the world, especially here in the U.S. Their huge debt, and inability to meet their debt payments has many European countries scrambling to help, since they have such strong financial ties to Greece.

In a new article on CNN Money titled “How the U.S. can avoid the Greek problem,” author Jeanne Sahadi urges the U.S. government to create a financial commission such as the bipartisan panel President Obama suggested to tackle the nation’s long term debt problems. Check out a snippet of Sahadi’s opinion piece below.

The delay in getting the commission up and running is due in great part to partisan jockeying from both sides of the aisle and continued uncertainty about whether current Republican lawmakers will agree to take part.

There's no guarantee that when it does materialize it will have the respect of many in Congress, which would have the final word on the commission's recommendations.

And the call for the commission has taken on greater urgency in light of the recent global volatility caused by the sovereign debt crisis in Greece, which threatens all of Europe.

"You need a fiscal commission. You need it now," Simon Johnson, senior fellow at the Peterson Institute for International Economics, told lawmakers this week.

The commission will be asked to figure out ways to get annual deficits down to 3% of gross domestic product by 2015 and thereafter put the country on a more sustainable fiscal track.

Continue reading at CNN.com…