Why is Greece such a big problem for the eurozone when the arguably far-worse financial plight of California is not raising similar concerns about the US or the dollar?
The question seems pertinent given the relative insignificance of the Greek economy – it accounts for less than 3 per cent of eurozone GDP (California provides about 13.5 per cent of US GDP). But I am not sure if I have yet heard a satisfactory answer. Suggestions I have heard include:Greece has exposed weaknesses in the eurozone’s political and crisis management systems, which imply it would be ill-equipped if ever a bigger member state was to get into as serious difficulties.The US economy allows fiscal transfers between states, to help the weakest. But other eurozone countries might well just let Greece fall into an abyss, whatever the consequences.Greece is not really such a big problem for the eurozone, but financial markets/commentators have over-reacted – or are biased against the euro, and will seize any opportunity to talk up the prospect of the monetary union breaking-up.The eurozone is only 11 years old, so a break-up is easier to envisage than a break-up of the United StatesEurozone politicians have much greater freedom to act (irresponsibly) because there is no single eurozone government. Hence the potential risks are greater.
Perhaps all the above are valid, but I am still not sure if they offer a full explanation to the Greece vs California conundrum. Maybe I have missed something?