In the past, Italian politics were never taken too seriously. Former Prime Minister
But the spectacle Burlusconi caused drew attention away from
This changed when investors began to take a close look at
The panic promoted Burlusconi to finally resign. His replacement:
As the European financial crisis has shown, nothing is certain. News could come out tomorrow that would throw investors into another panic over Italy or Germany, and France could grow tired of bailing out its neighbors. Anything is possible.
This uncertainty is not contained on European shores. If something catastrophic were to happen to
Italy, businesses and consumers in
Impact on consumers.
The U.S. economy is in a state of fragile recovery. If something went wrong it Italy, there is a strong possibility that the U.S. recovery could fall apart and the country could slip into a dreaded "double-dip" recession.
For instance, unemployment, which has been trending down, would go up again, as companies cut spending to ride out the downturn. Those who have jobs would see wages flatten, and in some cases, fall. Benefits would likely be cut as well.
The chaos in
Lastly, an Italian meltdown and the subsequent recession would have untold consequences on the psyche of American consumers. Workers in
Impact on businesses.
Businesses have been reluctant to spend since 2007, when the U.S. economy teetered on the brink. In recent months, however, businesses have been less reluctant to invest in new employees, causing a decline in the unemployment rate.
In a double-dip recession, business would again retract. Hiring would stop and other cost-cutting measures would be instituted. This problem would be especially acute at small businesses, which have smaller margins for error.
Without business growth, the cycle of retraction would continue. Business wouldn't spend and hire, so people would not have money to spend. It's a cycle that repeated itself from 2007 to 2010. Another recession would kick-start the cycle again.
All hope not lost.
Despite this somewhat dire outlook, there is hope that Italy can pull through this crisis and get its fiscal house in order. The new government says it's committed to reform. The strength of this commitment will ultimately determine the fate of the American economy.
And while Germany and France might be growing tired of helping poor neighbors, they have little other choice. As these countries learned with
First Greece, Now Italy
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- Is Europe Over?
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- Uncertainty Rises as Eurozone Crisis Deepens
- Balkans: EU Will Help But Countries Must Reform
- Papademos, New Coalition Government, Tackle Greek Crisis
- Greece: Banker to Head Coalition Government
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- The Perverse Side Effect of the Euro
- Europe's Crisis Is a Global Issue
- Europe, the International System and a Generational Shift
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- Euro Zone Rescue: Deja Vu All Over Again
- Eurozone Rescue or Recession? Fallout of the October Package
- European Union Leaders Reach Deal on Greece, but Worries Remain
- EU Leaders Announce New Eurozone Rescue Deal
- Can Europe's Divided House Stand?
- Greece's Youth: 'I Have No Hope'
- Battle for the Hearts, Minds and Wallets of Greeks
- France Teetering on Edge of Financial Precipice
- Why Care About the French Presidential Race
- Counterrevolution in Kiev: Hope Fades for Ukraine
- The Dying Bear: Russia's Demographic Disaster
- Bulgaria, Romania and Greece Initiate EU strategy for Balkans
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- Turkey: Is Quake Aftermath Widening Ankara-Kurdish Rift?
- Turkey's Never-Ending Kurdish Question
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Copyright 2011, U.S. News & World Report