Europe contagion fears felt overseas

and policymakers are starting to worry that the economic crisis in Greece could
cross the Atlantic and undermine the U.S. economic recovery, in the same way
that U.S. housing woes in 2008 battered Europe.

we have seen is that contagion”—economist-speak for a spreading
crisis—”has gone global,” says Harvard University economist Jeffrey

credit-market indicators of contagion to the U.S. aren’t yet flashing red, but
investors are keeping a wary eye on them.

are a number of ways that a crisis in Greece can spread to the U.S., say
economists, though most would require Greece’s problems to jump first to larger
European countries, such as Spain and Italy. By itself, Greece is far too small
to have much effect directly on the U.S. Its economy is about 2 per cent the
size of the U.S.’s and it takes in less than 0.1 per cent of U.S. exports.

Europe as whole has powerful ties to the U.S. through trade, investment and
finance. U.S. banks hold more than $1 trillion of European debt, according to
the Bank for International Settlements. Bruce Kasman, J.P. Morgan’s chief
economist, estimates that the 16 nations of the euro zone account for about 14
per cent of U.S exports, apart from petroleum products.

ties can become weaknesses in bad times. One big surprise of the U.S. housing
crisis was how many European banks held securities tied to worthless U.S.
mortgages and how much they lost. A recession in Europe followed quickly on the
heels of one in the U.S.

before the Greek crisis, the IMF estimated that the euro zone, whose economy
contracted by 4.1 per cent in 2009 would grow at just 1 per cent this year.
Anything short of that could curb U.S. exports and weaken what is projected to
be an already humdrum recovery.