What If a Eurozone-like Crisis Happened in the U.S.?

In GDP terms, Greece falling out of the euro zone would be like Maryland giving up the dollar for a weaker currency.
Andrew SawersJuly 6, 2012

The more zeros there are in the huge numbers that get bounced around in the headlines these days, the easier it is to lose sight of the scale of the euro zone problem.

To help readers on both sides of the Atlantic gain some perspective, we looked at the gross domestic product (GDP) of the United States and the euro zone, and at the proportion of the GDP contributed by each U.S. state and euro zone country.

Greece is widely regarded as the most vulnerable of the 17 euro zone countries and the one that could be forced out of it first. Accounting for 2.1% of the euro zone’s $11.7 trillion (€9.5 trillion) GDP, it’s roughly equivalent to Maryland, the 15th-largest state by the GDP, which contributes 2.0% of the $15.0 trillion (€12.2 trillion) U.S. national total. In other words, if the euro zone bid farewell to Greece, it would be like Maryland swapping the dollar for a new, weaker currency.

Spain, the next-most-struggling euro zone country with its stricken banking and property sectors, is the fourth-largest economy, making up 11.2% of euro zone GDP. If it were to fall out of the euro zone, the impact on the GDP would be, in U.S. terms, like California — which has the largest GDP of any state — and Washington state both giving up the dollar.

Italy is the biggest of the very-troubled euro zone countries. Third-largest overall after Germany and France, Italy has almost exactly the same GDP as California ($2.0 trillion; €1.6 trillion) but makes up 16.7% of the euro zone total, while California contributes 13% of U.S. GDP. On a proportional basis, Italy’s GDP is equal to that of Texas and New York combined.

Contagion is, of course, the big fear in the euro zone. Many observers think that if one country were to abandon the euro, others would follow. Five of the most vulnerable countries, branded “PIIGS” (Portugal, Ireland, Italy, Greece, Spain), are collectively worth almost exactly one-third of the euro zone GDP. That’s about the same as the 36 smallest U.S. states taken together or, if you start from the top, about the same as the 4 biggest states: California, Texas, New York, and Florida.

These figures don’t allow for things such as the volume of cross-border trade (which would be savaged by a country falling out of the euro zone), the amount of country/state debt, or the exposure of banks in each country or state to the shock that would be created. But they provide some scale for thinking about the impact of a euro zone breakup.

Andrew Sawers is editor of CFO European Briefing, a CFO online publication.