European Debt Crisis: U.S. Economy Recovery May Be Delayed

Pin It

In the era of globalization the U.S. economy recover is being threatened by Europe’s debt crisis. Against the dollar, the Euro hit a new four-year low Monday. Faster than a recent pledge of nearly $ 1 trillion dollars in bailout money can prop the alliance up, Greece, Spain, Portugal, Italy and Ireland are dragging down the European Union. To its lowest rate against the dollar since 2009, Britain’s pound also dropped Monday. Some economists believe a stronger dollar, weak Euro and depressed E.U. demand for U.S. exports could morph the E.U. financial crisis into a worsening global economic crisis.

Source for this article: European debt crisis poised to weaken U.S. economic recovery

Is the European financial crisis contagious?

Although the U.S. economic stimulus package appears to have staved off disaster for the meantime, the Wall Street Journal reports that Europe’s $ 1 trillion rescue plan won’t solve the debt problems of its weaker economies, which could hamper the U.S economic recovery. Economists warn that the severe government spending cutbacks in store for some countries will only make things worse. Already the Euro’s slide has the British Pound in frantic need of a small personal loan. Falling as low as $ 1.4256 Monday, the Pound dropped to its lowest level against the dollar since March 2009, after rising to nearly the $ 1.50 mark after Britain installed its new coalition government.

The Euro falling against the dollar

This year the E.U. financial crisis has hauled down the euro to about 14 percent on the dollar. CNNMoney.com reports that the Euro has slipped so far and so fast that some experts are now predicting what used to be unthinkable: The euro could, in fact, trade at equal value with the dollar sometime in the near future. The euro tumbled to a four-year low against the dollar in Asian trading, slumping to $ 1.2234 compared with $ 1.2359 in New York Friday. The European currency later stabilized during London’s trading day and was posting a small gain in late New York trading.

U.S. economy has a stake in Europe

Already the E.U. financial crisis is taking a toll on the U.S. economy. Just this month, the stock market was hammered with fears that Europe has done too little too late to control the European debt crisis. Announced in just the past few weeks were two separate bailout packages for Europe, but none has been able to put an ease on Wall Street’s nerves. But as a while, the U.S. economy has a stake in crisis Europe.

Europe’s U.S. imports are falling

Already the E.U. financial crisis is putting a strain on European governments and consumers, who are cutting back on spending. According to CNNMoney.com, the European Union was the largest destination for U.S. exports in 2009. However, during the first three months of 2010, the EU had fallen behind Canada. U.S. imports in Europe were still up slightly from the first quarter of 2009. However, the growth was significantly slower than the increase in Canada’s U.S. exports, including other large U.S. trading partners such as Japan and Latin American nations like Brazil and Mexico.

Crisis Europe is feeding on itself

While nothing good for the U.S. can be expected from the E.U. financial crisis, the Wall Street Journal reports that a weak Euro and U.K. Pound should help British and European firms sell more products to U.S. consumers and those in countries that value their currencies to the dollar. This debt relief, however, also comes with a catch: Britain and the continent sell most of their goods to each other, and they’re all broke.

Leave a Reply

*