European Sovereign Risk Growing Concern for U.S. Businesses and Banks

Friday, May 7th, 2010

The growing reality of the depth of the sovereign debt crisis in Europe and the risk accompanying it, is a growing concern for U.S. businesses, along with the banking industry,

Business executives in the U.S. now consider the global economic climate much riskier than it was a month ago, and there isn't much in the near future that will change the scenario.

U.S. banks and exporters could get hit hard as the European economy continues under stress, as demand is sure to decline for U.S. products in the region, and a number of banks have strong exposure to government and private debt in the region.

Lending from U.S. banks could be slashed even further in order to increase their cash reserves.

Fears over the potential depth and width of the sovereign debt crisis in Europe is spreading beyond the U.S. as well, with Asian markets getting hammered before the weekend, as China, Japan and South Korean stock markets plunged.

The growing possibility that Europe will slide back into a recession, one that could even be deeper than the one they're just emerging out of, is considered highly likely by a growing number of economists.

Being the second-largest economy in the world behind the U.S., and with strong business connections between the two regions, they could drag the U.S. back into a deep recession as well.

Some economists believe that scenario is less likely, but the very weak U.S. economy could easily slide, depending on how deeply Europe falters.

The fear is the ongoing news of the potential economic contagion in Europe could spill over to anywhere in the world, and we'll probably be back to where we were a couple of years ago, and potentially worse.

Consumers with disposable income are sure to start cutting back on spending again in order to take a more defensive financial position, which would slow almost everything else down too.

Remembrance of the assertion that the subprime mortgage crisis wouldn't spread is still fresh on a lot of people's minds, and to say the sovereign debt crisis is contained in Europe is far too premature a conclusion to make.

We're going to be in for a wild ride over the next several months with no guarantees where we'll end up.

Article by Gary B

The views expressed are the subjective opinion of the article's author and not of

Tags: consumer spending , greek sovereign debt , recession , sovereign debt crisis

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