WASHINGTON — Greece's economy is about the same size as that of Massachusetts. The Mediterranean nation ranks 63rd among buyers of U.S. exports. Athens is 5,139 miles from Washington.
But despite this literal and figurative distance, the Greek debt crisis has created a new set of risks for the U.S. economy — remote risks, perhaps, but real nonetheless.
Economic policymakers and many private analysts see a danger that the Greek troubles will lead to the next wave of turmoil for the global economy. Investors are pouring money into government debt around the world, viewing it as a safe investment in an uncertain time. That has helped keep interest rates very low in most large countries, fueling the global economic recovery.
There was good news Thursday even for Greece, which successfully sold about $6.8 billion of 10-year debt, suggesting that global investors expect Athens to steer its finances into line.
But if a crisis of confidence in government debt were to erupt, it could spread quickly because of the way European economies are linked with one another and with the rest of the world.
Any default or near-default by Greece could lead investors to question those assumptions, raising doubts that the debts of other nations, including Spain and Italy, and even Britain and the United States, are safe.
As investors perceive a greater risk, they would demand higher interest rates on their loans, causing rates to rise and choking economic growth. Mortgage rates would rise, for example, and it would become more expensive for businesses to borrow money to expand.
The fear among some analysts is that just as subprime mortgage loans — representing a minuscule portion of the global financial landscape — triggered a massive crisis in 2007, so could Greece cause problems for much bigger — and apparently more stable — nations around the world.
One of the lessons of the global financial meltdown is that crises tend to evolve in unpredictable ways. That was also the experience in the late 1990s, when market concerns about Thailand's foreign debt led investors to question the finances of several other East Asian nations, resulting in the Asian financial crisis of 1997-98.
"Greece is like Thailand in 1997 and like subprime in the summer of 2007," said Robert Dugger, a managing partner at Hanover Investment Group, a financial consulting firm.
Such contagion has not yet spread from Greece, and forecasters generally view this prospect as a "tail risk" — a danger that's unlikely to arise but that would be nasty if it did.