European debt crisis threatens US recovery

U.S. credit markets may freeze, leading the American economy to slide back into a recession, if the debt crisis plaguing a few European sovereigns spreads to the core eurozone countries. Analysts at Toronto-based Capital Economics said the potential recession across Euro area and the possible break up of the roughly decade-old currency creates an incredible amount of uncertainty for the U.S. economy. America’s trade links “with the peripheral eurozone countries are small, with the U.S. less exposed than it was to either the Mexican peso crisis in late 1994 or the Asian crisis in 1997,” according to Capital Economics. But if the debt crises experienced in Portugal, Italy, Greece and Spain expands to France, Germany and the U.K., “then the impact on the U.S. would be much greater.” Earlier Wednesday, Jose Manuel Barroso, president of the European Commission, announced proposals for euro members to jointly issue bonds, which is a measure resisted by Germany, according to MarketWatch. Meanwhile, one debt issuance of German government bonds failed Wednesday, heightening fears the crisis is spreading, MarketWatch reported. Write to Jason Philyaw. Follow him on Twitter: @jrphilyaw.