Why the unstable euro financial market hurts the U.S. economy

Why the unstable euro financial market hurts the U.S. economy
July 13, 2012
Richard Wobbekind
Although the financial troubles of Spain and Greece are far away across the Atlantic
Ocean, they are closer to home than you think and are affecting the American
economy, says Richard Wobbekind, an economist with the CU-Boulder Leeds School
of Business.
CUT 1 “It’s definitely impacting the national economy in terms of the uncertainty.
That’s one of the things that’s feeding the uncertainty in the business community in
particular. (:11) That’s really one of the reasons why we are seeing GDP growth in
this past quarter below 2 percent. We really thought it was going to be over 2
percent. Not a lot over but a little over at least.” (:20)
Wobbekind says that uncertainty is feeding fears by some people that what
happened in the U.S. in 2008 will happen to Europe in 2012.
CUT 2 “You can harken to 2008 and say, ‘Are we going to go through the same kinds
of financial chaos in that part of the world as we did in the U.S.? How much
transparency is there? How many of these banks are linked together?’” (:13)
Which, in turn, says Wobbekind, makes Americans wonder that if there is a
European bank crisis will it impact American banks? He says not as much as people
might think.
CUT 3 “The tendency is for people to think that the U.S. banks are going to have
potentially significant impacts from the European debt. There really isn’t as much
linkage with the U.S. banks to the European issue. It’s more the European banks to
the European banks.” (:13)
But while U.S. banks may not be linked closely with European banks, Wobbekind
says what happens in Europe will be felt throughout the world markets.
CUT 4 “The European economy is a big economy. If the European economy starts to
go into broad-based recession you start to take everybody down because of the
banking crisis. Then you have a real slow down in world GDP growth. (:15) And that
impacts the U.S. because we trade a lot with Europe. It impacts China because they
trade a lot with Europe and it impacts India. So it really brings down world growth
rates and that filters back to the U.S. ” (:27)