The euro crisis: Everybody's problem

(CBS News) The state of the European economy has become something of an issue in our presidential campaign. So just how bad ARE things over there? We asked Clarissa Ward to check it out:

Europe is in the midst of its greatest financial crisis since the Second World War, and nowhere is that more apparent than in Greece.

When Achilleas Mourtzouchos joined the family business, the popular Greek clothing chain Raxevsky, he had big plans for the brand. Now, he's just trying to stay afloat.

He told Ward that three years ago, before the crisis hit, his warehouse would have been a lot more hectic: "Yes, there were a lot more clothes coming in, and there were a lot more clothes coming out!"

But when the crisis hit, credit lines disappeared and customers - hit hard by austerity measures - cut back on their spending.

Plans for international expansion were shelved. Nobody wanted to touch anything to do with Greece.

"It's actually pretty remarkable to see how they backed off when the crisis started," said Mourtzouchos, "and even though everything was just smoothly and forward, suddenly they say, 'OK, we have to think about it. Things are not looking well for Greece, are you going be there next year? Next week? Next, probably tomorrow?'"

The outlook for Greece is not good. The country has been in recession for five straight years. Twenty-two percent of Greeks are out of work. Thousands are out on the streets.

So how did this idyllic vacation destination - tourism is the leading industry - spark a crisis that now threatens the world's largest economy?

Economists call it contagion. When one country, like Greece, cannot pay its bills, it pushes up the cost of borrowing in another country - Spain, for example, which then forces Spain to ask for a loan so that it can keeps its banks liquid. And that money has to come from richer, northern European countries, like Germany, putting a strain on those economies as well, and eventually threatening the economic health of all of Europe.

"By definition, each one of these events is everybody's problem," said John Kornblum, the former American Ambassador to Germany.

"There may have been a time a year or so ago when they may have thought it was Spain's problem or Ireland's problem, but since then everybody's understood that this is everybody's problem."

But finding a solution won't be easy. Seventeen European countries use a single currency, the euro, which is not backed by a government or central bank; and each of those countries runs its economy independently.

It is increasingly clear that the system is not working. Many believe that for the euro to succeed, countries would have to give up some of their autonomy, just as states do to the U.S. federal government.

"The real question is, is this crisis deep enough and frightening enough to convince populations and governments to really give up sovereignty and to become federal?" asked Kornblum. "Or is it going to become just another episode, and they'll go back to being nations in their own way? I personally am skeptical that this is going to be deep enough to do it, but, you know, it's a nice hope, and I hope it happens."

For now, that's all it is - a hope. Europe has yet to announce any decisive plans for how it will move forward. And the longer it waits to do so, the tougher it gets for businesses like Raxevsky to stay afloat.

Up to this point, Mourtzouchos has managed to keep most of his people. Every one of the 280-strong staff agreed to a 12 percent pay decrease.

But nine of the chain's 69 stores have closed down.

"Do you think you'll have to close more?" Ward asked.

"We have made plans for the worst-case scenario, yes," he replied.

Politicians and businesses across the globe are doing the same. But with a question mark hanging over the future of the eurozone, nobody knows how bad a worse-case scenario could get.