Italy's Debt Crisis Effects on a Global Scale

With a deficit more than the entire country of Italy's fiscal output, drastic measures will need to be taken in order to restore a sound economic standing.

No country is particularly concerned about jumping to the bailout aid of Italy, mainly due to the economic instability and flaw which is currently apparent.

Tied closely in this time of economic peril, Greece and Italy, both in the euro zone, would greatly damage the economy on a worldwide scale if they were to default, or in Greece's case, go back to their own currency, the Drachma. An MSNBC bottomline report explains exactly what the relationship between the U.S. and these struggling European countries is (not to say the U.S. isn't struggling).

A proposed technique in curbing national debt for Italy is essentially taking away interest from bondholders within the nation. While this would be a sure way to save money, it's surely approaching, if not crossing, a line of ethics as well as causing a potential ripple effect on the worldwide economy. In a country of such large size, it's almost impossible for any country, let alone Europe, to figure a way to redeem them economically. If they cannot find a way to supplement the huge national deficits, the country would likely have an largely adverse affect on not only surrounding countries, but the whole world.

According to a CNN report, defaults by italy would likely cause Spain, Portugal and perhaps Ireland to do the same in light of their economic interdependence. While Greece, Portugal and Ireland have all recieved bailouts in the past, the future of Greece was arguably made brighter by Lucas Papademos, recently appointed to head an "interim crisis cabinet" which recieves credit for saving Greece from an economic disaster.

Photo by davekellam - Flickr

A Brighter Outlook

According to Reuters, "The euro rose from a one-month low on hopes that new governments being formed in Italy and Greece could help fend off a euro zone break-up." While the euro has held its ground thus far, none of these European countries in economic struggles have found their way out of the woods yet.

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