Europe drags the United States of America to the bottom, languishing from the global financial crisis. Tourism, trade and the raw materials industry, which previously supported the economy, are no longer in demand. Close economic relations between the US and the EU have brought the European crisis to the United States.
Mark Vitner, a senior economist at Wells Fargo, conducted a research, which showed that the states, whose economies depend on exports, suffer from the crisis most. Utah, West Virginia and Nevada that used to sell natural resources to Europe, experience hard times nowadays. Until recently, gold and silver was the breadwinner of Utah and Nevada. The two states used to ship the precious metals to wealthy Europeans. Now the situation has changed radically. It is ethical and material needs that matter – aesthetic needs are no longer important. What kind of gold can there be if the King of Spain was forced to cut his own salary by even percent?
Coal became a stone around the neck of West Virginia: the state is the largest exporter of coal. Louisiana suffers too: its economy is based on petroleum and chemical industries. However, in the first half of the year, exports of chemicals from Louisiana to Europe have dropped by 31 percent.
The crisis of the Eurozone has hit the economy of South Carolina, which is focused on the transportation industry. In total, there are more than 250 companies working in the industry in the state. They employ over 32,000 people. Exports in the state have dropped by 1.4 percent of GDP during the recent year. However, the economy of the state is still afloat owing to investments in the companies, such as, for example, a new plant for the construction of Boeing aircraft – the most popular aircraft around the world.
At the same time, the State of Alabama that was prospering owing to the export of vehicles recorded a significant drop in demand for cars and trucks. It is not a catastrophe for the state, though Mercedes-Benz, Honda and Hyundai began to expand production at factories.
Commercial relations between countries involve a lot of people. According to the Office of U.S. Trade Representative, the trade between the EU and the U.S. involves more than 7 million employees. As much as 3.6 billion dollars circulate through their hands every day. It turns out that the slowdown and decline in exports creates the shortage of jobs not only in Europe but also in the States.
However, the EU is not the only pebble on the beach. If Europeans do not need new aircraft, then there are many other countries that need the aviation industry. This is exactly what saves the State of Washington, whose economy is 71 percent dependent on revenues from the aviation industry.
Nevertheless, economist Mark Vitner is concerned that if aviation exports continue to slow in the future, the economy of Washington will begin to suffer from serious financial starvation. Connecticut will find itself in the same position: the state is two-third dependent on the sale of aircraft and related equipment.
The clouds are thickening over the states, whose economies are traditionally based on the tourist industry. The root of the problem lies in the fact that 40 percent of all travelers in the United States are Europeans. Nowadays, this significant sector of tourism has declined noticeably, which affected the budgets of the cities that attract tourists. The crisis in the EU has struck New York, Los Angeles, Miami, San Francisco, Las Vegas, Orlando, Florida and Washington. The financial situation in the euro area affects the economies of the U.S. East Coast worst.
The crisis has also hit the country’s financial centers – New York, Chicago, Philadelphia and Boston. Last month, The Wall Street Journal reported on the reduction of 18,000 employees of six largest U.S. financial companies over the past year. That was 1.6 percent of the total number of jobs.
It turns out that the Americans have good reason to frown at the problems in the European Union. Edwin Truman, a senior specialist at the Peterson Institute for International Economics, admitted in February of this year that the real economic damage, which Europe caused to the global economy, made up one trillion U.S. dollars. In this regard, President Barack Obama speaks to Angela Merkel nearly every week to discuss all possible ways to fight the never-ending problem. However, their meetings bring no results.
At the same time, it seems curious that when Europe asked to increase the financial help through the IMF to create the financial protection system, and when the head of the fund urged other countries to take part in the solution of the problem, it was only China and Japan that responded. The U.S. simply shrugged it off. However, several countries receive help from the US, and one should not require substantial support from America in light of recent events.
Indeed, in early July, the head of the IMF, Christine Lagarde, advised the U.S. should rescue its own economy. According to her, the economic recovery in the U.S. is still lukewarm. It depends on increased risk factors – in light of financial tension in the eurozone and uncertainty with domestic financial and budget plans. At the same time, Lagarde stressed that in case of collapse of the economy the U.S. may not hope for assistance from the IMF, because the fund does not have the resources that would be able to lift the “first economy of the planet” from its knees. This is “sink or swim” type of situation. If the USA does not take urgent efforts, it won’t swim.
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