U.S. Exposure to Euro Crisis
As the economic situation in Europe worsens, its important to understand U.S. exposure. While any slowdown in an economy as large as the EU will be felt globally, the U.S. has closer ties than most. Europe and the U.S. are greatly interconnected, through financial holdings, direct investment, and trade.
1) U.S. financial institutions hold large amounts of EU bank debt, from banks in France, Italy, and Germany. Exact exposure is difficult to know with certainty and firms are sharply reducing exposure, but U.S. firms face losses as the crisis spreads.
2) Europe accounts for 75% of U.S. foreign direct investment. These investment levels are likely to decline as the EU credit markets contract.
3) Europe accounts for 22% of U.S. exports. During a protracted recession exports to European countries will decline.
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