E.U.’s debt troubles shows troubling forecast for American Economy

     2007 seems like a funny memory to all of us by now. It’s hard to believe that only a few short years ago, the United States was on the verge of economic disaster. It’s been five years since the economy began to fail, but the economy is finally beginning to show signs of life as we enter 2012.
     Across the pond in Europe, however, things are bad, and it seems like they’re only going to get worse. Since the fall of 2009, five European Union economies (Greece, Italy, Ireland, Portugal, and Spain) have been struggling with an enormous debt crisis. Greece is perhaps the one nation with the most imminent danger of default (failing to pay its debt), caused by years of government spending that has exceeded the country’s expenses. All five of the nations in increasing financial trouble use the Euro, the EU’s currency. As a result, these nations are in serious financial trouble.
     The financial struggle in Europe has also become a political one. As of fall 2011, Ireland, Italy, Portugal, and Greece have all installed new systems of government as a result of the crisis. For the last year and a half, the failing economy has caused hundreds of thousands of Greeks to riot throughout the streets of Athens in protest of their government.
     According to The New York Times, the EU called for members of the European Central Bank (known as the ECB) to step forward “as a last resort” to bail out these economically-recessed countries. However, the bank, whose main goal is to prevent inflation, has requested to stay out of the situation until a political solution is reached first.
     After the verdict reached by the ECB, Europe’s banks started straining finances of its counterparts. In turn, they have hurt companies across the globe that rely on them for loans, says the Times.
     According to Forbes, countries are borrowing from the ECB because they do not trust each other’s economic stability. If these nations do not begin to work together and come up with a solution to this debt crisis, many of Europe’s economies will soon collapse. If these economies collapse, it could spell major trouble for the United States. As if we didn’t have enough financial troubles already.
     So why is this happening? It’s simple. The governments of Europe are unable to pay back their debts. Because they can’t pay back what they owe, they lose credibility as a financial power. Soon, no county will want to engage in trade with these nations.
     Even if the US and EU are separated by thousands of miles of ocean, the interconnection of these global markets could result in disaster for American economy. In addition to the housing crisis that has plagued our nation for the last few years; a default by nations overseas has the potential to build up an even larger financial struggle on America’s already ailing economy.
     Junior Chris Robotham believes that the European financial struggle could trigger a number of effects here in the U.S. “If one economy falls in Europe, more and more could follow,” he said, “unless you’re isolated, like the Soviet Union was during the Great Depression. It all comes down to whether or not these governments will be able to pay back their debts.”
     According to Richard Wolf of USA Today, the debt crisis could pose a threat to U.S. trade as well. Because 14% of all American exports come from 17 Eurozone countries, the U.S. will lose a large portion of this money if these nations default; most of it coming from the automotive industry, a top American export.
     “Detroit sells a lot of cars to the United Kingdom in addition to the U.S,” says history and economics teacher Ms. Fanelli. This overseas marketing “helps companies like Ford stay afloat.” If the debt crisis gets worse, American car companies will lose a great deal of money.
     “It may lead to the U.S. seeking trade with China, a county that also loves American automobiles,” she said. Many experts believe that trading with China is not the best solution.
     The European debt crisis is getting worse every day, and it could affect America very soon if not addressed promptly and aggressively. Only time will tell if Europe can make its way out of financial hardship and prevent America’s economy from going even farther south.