Tags: European | Crisis | US | Economy

Experts: European Crisis to Plague US Economy for Years

Wednesday, 16 Nov 2011 08:28 AM

The fallout from the European debt crisis will take years to clear, plaguing the U.S. economy for up to half a decade, experts say.

Southern European countries will need to cut government spending and pay down debts, which will take a long time, so get ready for more roiling markets.

"Despite rebounding market confidence over the past week, the recent worsening in the larger sovereign bond markets of Europe suggests greater risk to the U.S. and other regions," Steven C. Wieting, Citigroup's managing director of economic and market analysis, writes research note, according to CNBC.
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"The impact of Europe is no longer a question of isolating weakness to peripheral countries, but one of how Europe's instability/austerity is isolated from the larger world."

ecbsign200gtty.jpg
The European Central Bank
(Getty Images photo)
Some have warned the debt crisis could sicken the European economy the long haul, including Ben May, European economist at Capital Economics in London, who says the debt mess in Italy to last "as long as two decades" until the government there gets its debt to GDP ratio below the 100 percent benchmark.

"Unless the rest of the euro-zone provides Italy with significant amount of assistance over a prolonged period, we think Italy will eventually default with catastrophic consequences for the wider region," May says in a note, CNBC adds.

Calls for European banks to dump Italian debt have grabbed headlines, including those made by Christian Clausen, president of the European Banking Federation.

"The banks are doing exactly what they should be doing: they are reducing their risk toward this event. We can see that clearly as now Italian bonds are being sold off," Clausen, also chief executive officer of Nordea Bank, tells Bloomberg.

"They should keep doing what they are doing. The banks are actually moving out of the epicenter."

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The fallout from the European debt crisis will take years to clear, plaguing the U.S. economy for up to half a decade, experts say. Southern European countries will need to cut government spending and pay down debts, which will take a long time, so get ready for more...
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Wednesday, 16 Nov 2011 08:28 AM
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