In the era of globalization the U.S. economy recover is being threatened by Europe’s debt crisis. Monday the Euro hit a new four-year low against the dollar. Greece, Spain, Portugal, Italy and Ireland are dragging down the European Union faster than a recent pledge of nearly $ 1 trillion dollars in bailout money can prop the alliance up. To its lowest rate against the dollar since 2009, Britain’s pound also dropped Monday. A stronger dollar, weak Euro and depressed E.U. demand for U.S. exports could transform the E.U. financial crisis into a worsening global economic crisis, at least that’s what economists believe.
Source for this article: European debt crisis poised to weaken U.S. economic recovery
Is the European financial crisis contagious?
While the U.S. economic stimulus package seems to have staved off disaster for now, the Wall Street Journal reports that Europe’s $ 1 trillion rescue plan won’t solve the debt problems of its weaker economies, which could weaken the U.S. economic recovery. The severe government spending cutbacks in stock for some countries, as economists warn, will only make things worse. Already the Euro’s slide has the British Pound in frantic need of a small personal loan. After rising to nearly the $ 1.50 mark after Britain installed its new coalition government, the Pound dropped to its lowest level against the dollar since March 2009, falling as low as $ 1.4256 Monday.
The Euro falling against the dollar
To about 14 percent on the dollar, the E.U. financial crisis has dragged the euro down this year. The Euro has slipped so far and so fast that, according to CNNMoney.com, some experts are predicting what used to be unthinkable: Sometime in the not-so-distant future, the euro could actually trade at equal value with the dollar. The euro in Asian trading stumbled to a four-year low against the dollar, falling to $ 1.2234 compared with $ 1.2359 in New York Friday. During the London’s trading day, the European currently later stabilized and was posting a small gain in late New York trading.
Europe’s debt crisis affects U.S. economy
Already there are signs showing that the E.U. financial crisis is affecting the U.S. economy. The stock market was battered earlier this month by fears that Europe has done too little too late to contain 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.
U.S. imports in Europe are falling
Already the E.U. financial crisis is putting a strain on European governments and consumers, who are cutting back on spending. CNNMoney.com reports that 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. Europe’s imports of U.S. goods were still up slightly from the first quarter of 2009. But the growth was much slower than the increase in U.S. exports to Canada as well as other large trading partners such as Japan and Latin American nations such as Mexico and Brazil.
Crisis Europe feeds on itself
According to the Wall Street Journal, although nothing good can be expected from the E.U. financial crisis for the benefit of the U.S., a weak Euro and U.K. Pound should assist British and European firms in selling more products to U.S. consumers and those in countries that value their currencies to the dollar. However, even this debt relief comes with a price: Britain and the continent make sales off of themselves, and they are all broke.