The Euro Crisis Could Cost America Too

The Problem• Central Bank/No Central Government– Different systems, Goals, Programs, Agencies

• EU countries having to bailout others– Germany/France bailout Greece/Italy/Portugal

• Investors Worried About Potential Losses – German bonds ↑ – French Bonds ↓

• Bad Time For Recession

How This Affects The U.S.

• Two very closely linked economies will assure that if Europe slips into a Recession the U.S. will feel its affects– U.S. will feel recession as Europe did after the financial

crisis of 2007– U.S. jobs hurt by effects European sector consuming less

because of recession– U.S. investors in Euro may sustain losses

• An increase in taxes to account for the financial aid sent to Europe to prevent the worse– An increase that will hopefully prevent European/global

recession and or failure of the Euro

Further Affects on U.S.

• Lower U.S. GDP by 0.1-0.2% in 2012• Key service sectors also are likely to be

affected: Tourism, Finance, Entertainment, Software, Auto and Plane sales, Coal, Metal and Engineering

• Rise in Unemployment by 2%

Possible Solutions

1. Reform of the EU itself to create stronger ties between EU governmental systems– EU Ministry of Finance with finance and tax raising powers

2. Allow the default and expel defaulted countries from EU

3. Abandon the Euro and resort back to former currencies– German Mark, French Franc, Irish Pound, Greek Drachma, Italian Lira, Spanish

Peseta, Dutch Guilder

Unfortunately all three options have downfalls, but as of just recently the EU has planned meetings to discuss the 1st

option