All this because Greece is at a crossroads, unable to form a government and decide whether it will continue on a path of harsh austerity measures or walk away from its debts and give up on the euro. That would leave many European countries holding their debts and shake the foundations of a currency used by 331 million people.

Here’s what a Greek debt default and exit from the 17-nation eurozone might mean for people in the United States:

___

BANKS:

The short-term financial consequences of Greece defaulting may be limited across the Atlantic. American banks already have sharply reduced their exposure to Greece by more than 40 percent to $5.8 billion, according to the government. Cornell University economist Eswar Prasad said he foresees little immediate blowback for the U.S. financial sector.

But the concern is that market speculation would then fall on the far larger economies of Spain and Italy. Both are deep in the red and heavily dependent on credit markets to stay afloat. And their debts are held by Europe’s big banks.

Economists call this threat contagion. Scared investors sell off their assets in Europe’s most troubled economies and the governments struggle to access credit while falling into deeper recession. A crisis as bad as Greece’s in a bigger nation would have severe global implications.

“Greece is peanuts as far as the United States is concerned,” said Uri Dadush, former economic policy chief at the World Bank. “But if Greece leads to the contagion of Spain and Italy, the euro could implode. This is big business for the U.S. We’re talking trillions of dollars in direct and indirect exposure to the European banking sector.”

Economists cite the example of Lehman Brothers’ collapse in 2008 and the financial turmoil that followed. A repeat scenario could see credit lines dry up as banks short of funds limit their risks, making it harder to secure loans for business expansion and home mortgages.

Lending and credit growth remain especially weak in Europe, where over $1 trillion in cheap, three-year loans to financial institutions by the European Central Bank helped stave off a complete credit cutoff. A massive bailout fund has been set aside in case Spain or Italy fails, too, but a default by either country could spell disaster for German, French and other heavily exposed banks. They, in turn, deal extensively with American banks.

“It’s a question I don’t want to find out the answer to, honestly,” Dadush said. “There is a real danger of global depression.”

___

MARKETS:

Many pension funds, insurance companies and other big investors have dumped or written off investments in Greece such as government bonds. But there’s no telling how the markets will respond to a default.

For investors who have already faced a half-decade of turbulence, this weekend’s failure in Greece to form a new government led Monday to steep market drops across Europe. Britain’s FTSE slipped 2 percent, while Germany’s DAX was off 1.9 percent and France’s CAC 40 fell 2.3 percent. In the U.S., the Dow Jones industrial index was down 0.8 percent at 12,714.

Each round of bad news from Europe raises uncertainty. No one knows how a Greek exit from the euro would work and the financial swings have added to the stress on Europe’s economy. And every time stocks plunge and the borrowing costs for troubled countries rise, businesses and consumers grow more cautious. This makes them more reluctant to expand companies or buy more property.

Europe’s turmoil “does not bode well for the fledgling U.S. recovery,” Prasad said. He predicted that uncertainty in Europe will rattle U.S. financial markets, as happened last year, shaking fragile consumer and business confidence.

Individual American investors should be concerned as well, even if most have little direct exposure to southern Europe. Market declines across Europe could drag down Asia and the United States, hitting portfolios and retirement funds. And when people feel poorer, economies shrink.

___

TRADE:

Exports have been a bright spot for the U.S. economy, and Europe has played a big role. More than half of U.S. foreign investment and a fifth of all American exports go to the European Union. A significant slowdown there could mean less revenue for U.S. companies, less expansion at home and lost jobs for American workers.

“Right now, the best case scenario in Europe is a recession,” said Chad Moutray, economist at the Washington-based National Association of Manufacturers. “Any of the worst case scenarios threaten our growth strategy.”

U.S. manufacturers have added 167,000 jobs over the last five months, but a European economic collapse would hamper growth in two ways. It would weaken Europe’s general demand for goods. And if investors flee Europe for safer bets elsewhere, the value of the euro would sink and make American products more expensive.

Many major U.S. companies not only export but have large operations in Europe. General Motors and Ford both make cars there and have faced slack sales in a competitive market that offers manufacturers little pricing power.

Unemployment rates of over 50 percent for people under 25 in Spain and Greece have undermined the market for first-time car buyers in those countries. Unemployment across the eurozone is already at 10.9 percent, a record since the common currency was introduced in 1999. If that figure worsens still, it would further dampen American sales.

___

U.S. POLITICS:

Any new economic crisis presents a problem for Obama, even if Europe’s problems are largely beyond his control.

Higher unemployment, a surge in gas prices or collapsing stock portfolios in the United States would undermine the president’s argument that he has slowly but surely guided the U.S. out of its worst downturn since the Great Depression. His November showdown against Republican candidate Mitt Romney is still too close to call and will hinge on the economy.

“He’s put us on a road to become more like Greece,” Romney said last month, hammering away at a campaign message that has focused on debt, unemployment and the lackluster state of the American economy.

Even if a Greek default may also undermine the harsh austerity tactics championed by some Republicans, Obama would face a severe backlash if Europe’s ills were to cause the U.S. to slip into a double-dip recession. That seems unlikely for now, but Obama is already challenged by unemployment hovering around 8 percent and an economy only expected to grow by about 2.5 percent this year, still slow for an economic recovery.

Yet Obama can do little about Europe’s ills. His administration insists that Europeans should fix their own problems without U.S. assistance — a stance it must take because there is no appetite for U.S. taxpayers to help bail out Greeks or anyone else in Europe. Washington has pressed Europe to stimulate their economies more.

But Obama can’t even control the U.S. economy, after pushing through a $787 billion stimulus package in 2009 that critics charged with not doing enough to create jobs and spur economic recovery.

“As has happened several times before, when our economy gets going, events elsewhere can intervene and throw a monkey wrench in the works,” Obama senior campaign adviser David Axelrod recently said. “We’re not hoisting a ‘Mission Accomplished’ banner. We know there is a lot of work left to be done and the headwinds are part of that equation.”

___

McHugh reported from Frankfurt, Germany. AP Economics Writer Paul Wiseman contributed to this report.

Clinton’s only event on Wednesday before the talks begin on Thursday is a dinner with Chinese State Councilor Dai Bingguo. Aides traveling with her refused to discuss the Chen case or say whether Clinton would raise the matter with Dai.

Chen, a 40-year-old lawyer who exposed forced abortions and sterilizations as part of China’s one-child policy, was delivered into the protection of U.S. diplomats in Beijing late last week, according to fellow activists. They say American and Chinese officials are intensely discussing his fate, which could mean getting political asylum in the United States or staying in China, which Chen has told some activists he prefers.

A nationalist Chinese newspaper, the Global Times, warned that the United States would be interfering in China’s domestic affairs and would embarrass itself if it tried to lobby Beijing on behalf of Chen, saying in an editorial that Chen’s activism was that of a villager’s complaints against local officials.

Questioned on Chen’s future, President Barack Obama on Monday dodged the issue at a Washington news conference, declining to confirm that he was under U.S. protection in China or that American diplomats were attempting to negotiate an agreement for him to receive asylum.

“Obviously, I’m aware of the press reports on the situation in China, but I’m not going to make a statement on the issue,” the president said. “Every time we meet with China the issue of human rights comes up.”

The Obama administration has signaled that the global economy, North Korea, Iran and Sudan — issues in which millions of lives are at stake — are more important in U.S.-Chinese relations. And it is refusing to say if Chen will even be a topic of discussion this week.

The president’s options are limited. Pressing the issue too hard may prompt a backlash from China, which the U.S. relies on for foreign capital and support in trying to lead the global economic recovery, deal with North Korea and Iran’s nuclear programs and prevent a potential war between Sudan and South Sudan.

But facing a tough fight for re-election in November, Obama cannot afford to ignore the situation. Doing nothing to help a visually impaired, self-taught lawyer who has fought against forced abortions and corruption in China would open Obama to attacks from his presumed Republican opponent, Mitt Romney.

Romney and several Republican lawmakers already have demanded that Obama not back down to Beijing. Handing over Chen without adequate safeguards would also draw intense criticism from the human rights community in the United States, one of Obama’s core constituencies.

“The U.S. government has a moral obligation to ensure that Chen Guangcheng, his family and any who aided his Houdini-like escape from house arrest are either granted asylum in the United States or are not mistreated if any of them choose to stay in China,” said Frank Jannuzi, head of Amnesty International’s Washington office.

Bob Fu of the Texas-based group ChinaAid, who has been in touch with people close to Chen, said Tuesday he had no direct word from the lawyer’s wife and two children, but understood from people living in the same locality that they were still at their home in Shandong province.

Chen’s older brother, Chen Guangfu, is still missing, he said. Rights activists say the brother was detained last week.

But Chen’s nephew, Chen Kegui, has contacted a human rights lawyer and does not appear to be in custody, Fu said. He had reportedly gone missing last Friday after a confrontation with men outside his house in the same village.

The key to resolving the situation may well rest with an aging cadre at the top of China’s Communist Party, who could either promise protection for Chen and his family in China or allow him to leave the country, possibly even to Hong Kong or Macao, as they prepare for their own leadership transition later this year.

Activists say Chen prefers to stay in China if his safety and that of his family can be guaranteed. That would require national leaders to step in and protected Chen from local officials, who’ve kept him and his wife confined at home since his September 2010 release from four years in prison on charges that supporters say were fabricated.

The ouster of powerful Chinese politician Bo Xilai following a deputy’s visit to the U.S. consulate in Chengdu in February has already embarrassed the party. It doesn’t want to lose more face over Chen, whose case was raised repeatedly by American officials, including Clinton, until the information blackout began last week.

Clinton also declined to talk Monday about Chen but said she would raise human rights issues at the upcoming meetings in Beijing.

“A constructive relationship includes talking very frankly about those areas where we do not agree, including human rights,” she told reporters.

Human rights talk has angered Beijing for decades and it has criticized the U.S. approach as lecturing. Clinton made waves on her first trip abroad as secretary of state when she said human rights could not dominate the entire agenda with China at the expense of other pressing issues. Her comments drew fire at the time, but the relationship has clearly evolved as global priorities have shifted.

China in the 1990s was in need of foreign investment and diplomatic partners and was willing to send jailed dissidents into exile to get them. But Beijing sees little need for such concessions now, with its diplomatic clout and coffers bulging with foreign exchange.

Activists said the top U.S. diplomat for Asia, Kurt Campbell, had been in intensive discussions in Beijing to strike a deal over Chen before Clinton and Treasury Secretary Timothy Geithner’s arrival. Those efforts were continuing Tuesday, according to activists.

___

Klapper reported from Washington. Associated Press writer Matthew Pennington in Washington contributed to this report.

From nuclear-armed North Korea to potentially nuclear-armed Iran, the Obama administration has won only lip-service pronouncements of agreement on the endgames, but little more. U.S. officials say Russia and China supported new penalties on Iran and fresh condemnations, but previous administrations had similar records.

China and Russia have blocked Obama’s attempts to get the United Nations to take significant action against Syria’s government and ignored U.S. warnings that they will end up on the wrong side of history.

The overtures have left Obama vulnerable to charges that he is being naive or too accommodating to both China and Russia.

Republican critics, including likely presidential nominee Mitt Romney, say the administration has gotten too little in return from Russia for concessions on missile defense and has not pressured China enough on currency and trade disputes that cost American jobs.

Attention turns to China this coming week when Secretary of State Hillary Rodham Clinton and Treasury Secretary Timothy Geithner attend strategic and economic talks in Beijing. Topics will include global economics, the violence in Sudan and maritime claims in Asia’s seas.

But threatening to overshadow the discussions is the fate of a blind legal activist who, according to overseas activists, fled house arrest in his Chinese village and is under the protection of American officials. The escape by Chen Guangcheng, who has exposed forced abortions and sterilizations in villages as a result of China’s one-child policy, underscores the fundamental differences between the two countries on human rights,

The U.S. and Chinese governments have not confirmed reports that he sought protection at the U.S. Embassy in Beijing.

Since Obama took office, China’s booming economy has driven global growth while the U.S. has struggled to emerge from its worst economic downturn since the Great Depression.

Greater Chinese assertiveness has resulted in clashes with the U.S. over naval vessels in the Yellow Sea and American exporters trading with Taiwan; with Japan over fishing rights; and with Southeast Asian nations over claims to the resource-rich South China Sea.

Washington’s chief complaint, however, has been Beijing’s shielding of North Korea from harsher condemnation and punishment for its nuclear weapons program and provocations that nearly plunged the Korean peninsula into war two years ago.

Previous rounds of the U.S.-China dialogue have been hailed as productive and have included new educational and scientific exchanges. They haven’t resolved points of contention over Taiwan, Tibet and human rights. U.S. arms sales to Taiwan, which Beijing regards as a renegade province, still rankle China. U.S. demands for greater respect for human rights and Tibetan culture have fallen on deaf ears.

With the Iraq war over and combat operations in Afghanistan ending over the next couple of years, the recalibrated focus on Asia directs American military might and diplomatic energy to booming markets such as China, India and Indonesia. More than half of the world’s population lives in Asia, which is seen as the future center of the world economy.

U.S. policy calls for increased cooperation with Beijing, where possible, and checking Chinese power in cases where it threatens allies and neighbors.

To ease concerns posed by the threat of China-backed North Korea, the U.S. has strengthened military alliances with South Korea and Japan. By speaking out against Beijing’s maritime claims, Washington improved ties with Southeast Asian nations fearful of an expansive and potentially belligerent Beijing.

U.S. relations with Vietnam and the Philippines in particular have benefited. Even reclusive Myanmar, long an international pariah protected by China’s diplomatic sway, has initiated democratic and human rights reforms to improve its standing with the U.S. and the West. The U.S. has taken the lead on talks about a new regional trade pact that would exclude China.

“We dealt cooperatively, extensively and candidly with China’s leaders, making clear our positive view of China’s rise and its regional role,” said Jeffrey Bader, Obama’s top China adviser until June.

Speaking last month, he summed up the administration’s China strategy this way: “To achieve limited but real success on global issues while pushing back when there was overreach.”

The administration has had some success.

While China appeared to be on the offensive in 2010, it has eased somewhat its rhetoric and tried to repair relations with its neighbors. Having seen the U.S. make inroads in places such as Vietnam and Myanmar, the communist government has been more prudent even if its foreign policy objectives remain the same.

Yet there may be little Obama or any other U.S. president can do to eliminate the long-term strategic distrust between the countries. Washington fears that an anti-democratic regime bent on regional hegemony could one day replace it as the world’s pre-eminent power, securing resources and favorable trade deals around the planet. Beijing sees its ascension threatened by U.S. economic and diplomatic alliances, particularly in Asia.

“At first glance, this heightened U.S. attention to the region has provoked consternation in Beijing,” said Elizabeth Economy, director of Asia studies at the Council on Foreign Relations. But, she said, “a stronger United States presence in the region, in many respects, is a prerequisite for more effective cooperation with Beijing rather than an obstacle.”

Obama also has worked to mend ties with the Kremlin. Relations plummeted during President George W. Bush’s administration after Russia’s 2008 war with Georgia and disagreements over missile defense and Iran.

A series of deals has helped reduce U.S. and Russian nuclear weapons, allow Moscow to enter the World Trade Organization and secure the Kremlin’s cooperation in Afghanistan.

But the relationship has again become strained by renewed disputes over Obama’s revised missile defense plans, Iran and Syria — and Russia’s own election fraud, coupled with incoming President Vladimir Putin’s claim that internal unrest has been the result of American meddling.

“For a report card, I’d give the reset a solid ‘B,’” said Andrew Kuchins, Russia director at the Center for Strategic and International Studies. “It would have been a lot stronger a year ago. Now there are a lot of questions about the future.”