Greece's debt crisis impacts Chicago

Protesters run away from tear gas at Syntagma square in front of the Greek Parliament in central Athens on Wednesday.

June 28, 2011 10:00:00 PM PDT
Chicago is 5,400 miles from Athens but the financial chaos in Greece is stinging City Hall.

City leaders haven't sent out any press releases, but Chicago currently has more than $320 million in foreign loans that are underwritten in Greece. Those bonds pay for city projects including airport development. Now what's happening overseas has the city scrambling for solutions.

As violence rages across the Greek capital, thousands of angry protesters clash with police. Demonstrators set fires and attack banks and government buildings.

Dozens of police and protesters are reported injured and arrests are widespread as the nation's debt threatens to topple its economy.

Greek legislators narrowly passed a crippling austerity package Wednesday, the only leverage against default.

Regardless, here in Chicago, city budget department officials say they are trying to get out from under bonds that have financial connections to Greece:

  • $100 million in bonds that were used primarily to fund the O'Hare modernization program.
  • and $222.8 million that can pay an array of capital improvements from schools to sewers.
  • The city obtained the bonds through Dexia, a European bank that is headquartered in Belgium and France. Dexia has billions of dollars in Greek government holdings.

    The hundreds of millions that Chicago obtained through Dexia are not your grandfather's municipal bonds with fixed rates and set dates of maturity. Many of the Chicago bonds have sliding interest rates.

    Since Greece went up for grabs, Chicago has been paying hundreds of thousands of dollars per month in additional interest on the Dexia bonds.

    Greek political experts say that uncertainty won't change quickly.

    "I'm afraid that the difficult phase for the government will start now," said George Tsogopoulos, political analyst.

    Chicago budget officials say with the uncertainty of the Greek-linked bonds and surging interest payments are offset by years of lowered broker fees the city negotiated with Dexia.

    Nevertheless, Chicago budget and management spokesman Peter Scales says "the city is in the process of replacing Dexia on the bonds as soon as possible." To one American tourist in Athens, the situation appears hopeless.

    "Greece is going to have to do what they have to do. Otherwise it's going to collapse. And they'll have no economy and they'll be worse off than with the cuts they're having to make. The United States is facing the same thing in the next few years," said John Johnson.

    Chicago's Greek-connected bonds expire in September and are a small percentage of Chicago's current portfolio according to city budget officials.

    Chicago appears to be alone. Financial officers for Cook County, the state of Illinois and the state pension fund all say they do not have any Greek-connected loans, bonds or investments.

    Load Comments