I know there’s a European debt crisis — and that’s pretty much as far as I understand it. Luckily, here in Baltimore we happen to have quite a few people who’ve looked at these issues more closely — and who can explain the situation in terms that make sense. The Johns Hopkins Arts & Sciences magazine tracked down four local experts — the Department of Political Science’s Nicolas Jabko and the Center for Financial Economics’ Olivier Jeanne, Robert Barbera, and Jonathan Wright — trapped them in a nice room with a big round table, and peppered them with questions about Greece, potential bank runs, and the possibility of global economic meltdown. Here’s how it went:
Q: Is there a real chance of an overnight crisis happening again that affects everyday people around the world? Like another Lehman Brothers, caused by a European country or bank?
RB: Yes, it’s possible.
NJ: Everything is possible.
JW: I think it’s more than just hypothetically possible. It’s a real risk.
RB: Europe could have a recession for the next two years, and our exports to Europe aren’t that important. But a financial system meltdown, as we all now know, would envelop the world, including and especially the U.S.
JW: As long as Europe muddles along without a financial implosion, its effects on the U.S. are probably second order, but if you have the devastating financial implosion, that affects the whole world.
OJ: An overnight crisis is possible and could be a good thing, if it compels European authorities to take the right actions. Looking forward a few years, I would give 20% odds on a rosy, near-perfect outcome where Germany makes the concessions that are necessary for the euro area to work properly. I would say probably 60% chance that the euro’s still there in five years, but with most member countries still experiencing low growth—which probably means an increasingly acrimonious euro area with a future that remains uncertain. And 20% odds that a nation leaves or is thrown out of the euro, with the risk that the whole thing collapses.
RB: Greece could leave. Greece could default. Greece could do a lot of things…
Read more of the conversation here.