Economic Program | Memo

Why Italy Matters—Could Europe’s Debt Wash Up On Our Shores?

by Lauren Oppenheimer and David Hollingsworth

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Well, Greece is done… maybe. But what’s next?

Meet Italy.

Italy is the world’s 8th largest economy and the 3rd largest outstanding debt. Creditors are banging on their door. Due to its size, an Italian bailout is out of the question. Because of its interconnectedness to the European and world economy, an Italian default could cripple the European banking sector and cause an economic catastrophe.

In this memo, we explain three key reasons why America needs to pay attention:

  1. Why the Italian economy is so integral to the European financial system;
  2. What an Italian default could mean for America; and
  3. How the options that European leaders have to prevent an Italian default stack up.

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