Italy's woes could be contagious, even for us.

1:43 AM contagious, could, Italys No Comments

The debt crisis in Europe may seem like a sea of the political Donnybrook on which to play U.S. budget. Europe suffer can soon much closer hit home, though, cost-cutting measures more cold water throw it on the global economy.

Foreign trade is one of the last bright spots left for the US economy. Euro zone countries since fighting their budgets slash and reduce borrowing, those issues are concerned the lower line of the American company cuts.

The latest reading on US exports, who reported, came Tuesday from the US Department of Commerce, that the increase in oil prices since 2008 the trade deficit to its highest sent. But the export side of the Sachkontosalden is good in your hand to relative, according to Paul Dales, senior U.S. economist at capital of economics.

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He said "Net trade decent made positive to real GDP growth in the second quarter". "Without that the economy can have full halted ground."

But the demand for U.S. slash were in Europe already as the weaker economies of the region to try spending, worsening debt crisis overcome slows down. $27.5 Billion were U.S. exports in the European Union in may - almost 20 percent of total exports. This is down from a record high of $30.3 billion in March.

Europe's debt crisis could the US economy hurt in several ways. As debt flooded streamline spending Governments, some of those cuts export American firms will hurt products and services in the euro zone.

Italy is the new "I" in pigs

As worry about the Greek debt crisis spread have, investors have pulled money from other weak European economies down pressure on the euro and this strengthening of the dollar. A stronger dollar helps keep interest rates in the United States, but it also makes it harder to keep their prices competitive, if they sell in the European markets for American companies.

Only this week was the hope that steep spending cuts on Greece, would, was limited by a budget crisis to the next for over a year stumble. But the debt contagion seems the spread.

This week escape began Italian bonds of investors who would like to make a possible downgrade of the Italian government debt. In response, the Government in Rome, to a $68 billion encrypted-savings package for the budget balance assemble until 2014. But investors remain skeptical about whether these cuts Europe's third largest economy can right.

Compensation of the Italian budget be a. The Government currently has a debt burden of about 125 of gross domestic product, which grew by only 0.1 per cent in the last two quarters. Compared the Federal is U.S. approximately 70 percent of GDP until end of the year, according to a recent report from the Congressional reach budget Office debt.

Much like Greece its economy in the face of severe spending cuts Treaty has seen, is Italy the prospect to a nasty recession, as it moves to balance to its budget.

This slowdown is probably distributed to other European countries, if the debt crisis continues to expand. Capital economics estimates that Italy's debt to the average of the euro zone would cut nearly 10 percent from euro shave zone GDP.

Italian as investors bonds flee, increasing the cost of financing Italian debt and cut the value of their bonds of Italian banks held. Its shares have hammered this week on fears that the banks may have insufficient capital of their bonds of contributions.

The larger concern is that the European authorities already at odds over whether continue to rescue operations for Greece, can resist taking on even more bailouts, when Ireland, Spain or Portugal come to summon help. Critics of the European Central Bank say, that if the debt crisis that spreads ECB, may soon have too many fires put out.

"they are fiddling not even while ROM Burns;" "You even a violin at this point does not have," said Citigroup Chief Economist Willem Buiter. "The financial resources available are insufficient with Spain or Italy address separately, let alone than together." "So we need an immediate increase in the size of the resources available."

The dissemination of Europe's debt crisis after Italy has also the dispute about the U.S. debt ceiling in sales efforts Washington brought. For now, investors apparently believe a default value from the Treasury is impossible. But the Italy crisis is a reminder that investors bets that a standard will - happen, so-called "bond vigilantes"-can strike without warning.

Investment Manager "(Italy) is the first G7 country to where the bond vigil successfully in this cycle have taken," said Subodh Kumar, analyst independent financial market. "So it's no stretch to say, ' why that happened to Washington should not, if no action on the budget deficit is?'"

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