The Organization for Economic Co-operation and Development (OECD) warned on Monday that the financial crisis in Europe shows little sign of being self-contained, and could pose a great risk to the growth of the U.S economy in 2012.
Reuters reported OECD predicts “Negative spillovers from the turmoil in European markets could be greater than expected,” contradicting previous down-played concerns from the Federal Reserve, and dampening predictions from economists earlier this year that showed an “Energizer-bunny-like” trade scenario between the U.S. and Europe.
“Spillover” seemed to be a key word in this statement—the European debt crisis spurs a series of events proving to be detrimental to future U.S. economic growth of which declining stock prices promises to have the most widespread and significant impact. This means the need to slash our own debt, which is already a sore spot for lawmakers unable to agree on what to cut. The effects trickle down even more if extended benefits for nearly two million Americans are not renewed at the end of next month, causing the most dramatic negative effect on the economic recovery.
Executives at major corporations, however, maintain that important business opportunities remain untapped across the Atlantic. According to news reports, President Obama is open to suggestions from European leaders on ways to boost trade while debt continues to plague countries like Greece, Italy and Spain. This includes efforts to grow emergent sectors like electric cars, smart grids and nanotechnology, and to encourage more raw materials trade.
Even though U.S. exports to the euro zone account for only about two percent of GDP, those troubled countries commonly referred to as “PIIGS” (an acronym for Portugal, Ireland, Italy, Greece and Spain) have seen decreases in shipments of U.S. exports drop by 13% year-over-year in Q3, while total U.S. exports have risen by 6.7% over the same period according to PIERS data. This sudden decrease could have serious implications for ocean carriers and NVOCCs who service these regions, especially considering the prevalent U.S. trade deficit with these countries.
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