Europe’s economy is more fragile than ever. With a recent election in Greece and uncertainty over whether or not the country will stay true to the terms of its bailout, now Spain and Italy are proving to be major areas of concern for the continent.
In Spain, the 10-year bond yield, which is often used as the mark of a country’s economic creditworthiness, rose to near a record 7 percent, a dramatic increase. And this comes on the heels of being knocked down three notches by Moody’s. Madrid took in about $125 billion in loans from investors, but the worry is that the country will not be able to repay the debt. Italy then reacted to this, and their 10-year bonds jumped to 6.1 percent. Matched with an overall debt of $2.4 trillion, further economic instability would be tragic for the country.
As a direct result of these uncertainties, European stocks fell across the board. But what’s happening on this side of the pond? How will the U.S. stock market handle this situation? Less money in Spain and Italy means less Spaniards and Italians traveling to the United States. What role does international tourism play in all this? And what about U.S. companies which manufacture products in Asia? Are Europeans still buying?
Peter Coy, Economics Editor, Bloomberg Businessweek