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Impact of European EURO Crisis on the US Marketplace - Research Paper Example

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Impact of European Financial Crisis on the U.S. Marketplace Since 2010, the Eurozone experienced a big crisis in terms of debt, where many governments in the region built up unmanageable levels of debt. In this regard, three governments turned to other European powers and international banking institutions for help in sustaining their debt levels and preventing defaults (Gros and Alcidi, 2011)…
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Impact of European EURO Crisis on the US Marketplace
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Download file to see previous pages In this regard, Greece was the first country in the Eurozone to seek assistance from the IMF, other member states and international financial institutions in managing its debt. One of the actions taken to relieve Greece’s problems was the lowering of bond values held by major investors, and in conjunction with other reasons, this becomes a major issue for the United States market place. The crisis in the Euro region is of continuing interest to the United States and other major economic powers in the world (Gros and Alcidi, 2011). One of the facts about this case is that the United States and the Eurozone have one of the largest economic relationships in the world, and there have been worries that the debt crisis being experienced in some parts of Europe could adversely affect the U.S. economy. This is because of the large commitment that major financial institutions in the U.S. committed to the salvaging of Greece’s debt crisis. Another area of concern is that the United States is one of the biggest contributors to the IMF funds, and the United States congress has been concerned about the level of commitment shown by the IMF to struggling European economies (Nelson, Belkin and Mix, 2011). This paper will analyze the potential effects that the Eurozone crisis might have on the United States marketplace and economy, which will be discussed by focusing on the individual investor, large financial institutions and the whole economy. One of the major effects of the Euro crisis on the United States market place is evident from the ties that major financial institutions have with the banks in Europe (Nelson, Belkin and Mix, 2011). From research, it is evident that European banks are some of the main players in the euro crisis, since they have to extend financial help to the affected countries (Nelson, Belkin and Mix, 2011). The relationships that the European banks have with the banks in the United States indicate that they are all at a risk from the credit extension granted to the countries in financial trouble. Research indicates that a total of $700 billion is held be U.S. banks in Great Britain alone, and a total of about $350 billion in France, Germany, Italy and Spain, which are countries at the center of the Euro crisis (Nelson, Belkin and Mix, 2011). These countries, with the exception of Great Britain, could descend into default if the crisis escalates, and with them, carry the risk of the U.S. banks. The impact of these financial commitments in the financial countries could cause a major financial crisis in the United States and with the country; recovering from the 2007 financial crisis it cannot afford another crisis. Despite the fact that major financial institutions have their loans spread out through different regions in the Eurozone, a crash or default in any of the countries would have a domino effect on all banks and other financial institutions (Nelson, Belkin and Mix, 2011). This could lead to a tightening of credit in the United States market as the banks try to consolidate their capital, which would cause a serious reduction in the capital available to internal investors. The other effect that the Euro crisis would have on the United States market place would be felt by exporters. Research indicates that more than 25% of all exports from the United States ...Download file to see next pagesRead More
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