Rescue Loans for Spain's Banks Buys Europe Time
A $125 billion plan to rescue Spain's banks won't solve Europe's debt crisis or ease the pain of double-digit unemployment across the continent.
But it is likely to calm financial markets and buy time for European policymakers to work with other weak economies threatening the stability of the 17-nation eurozone.
"You don't want an economy of that magnitude going down the tubes," says Daniel Drezner, a professor of international politics at [The Fletcher School at] Tufts University in Medford, Mass. Spain has the world's 13th-biggest economy, more than four times the size of Greece's. It is the fourth-largest economy in the Eurozone.
European economic troubles pinch U.S. businesses. U.S. companies send 22 percent of the goods they export to Europe and have more than $2 trillion invested in factories, offices and businesses there.
A bigger fear is that Europe's financial troubles could cross the Atlantic. When banks lose confidence in each other, they refuse to lend each other money. Credit dries up, depriving economies of the fuel they need to grow. A financial crunch can wreck the economies on both sides of the ocean as it did in 2008.
"Anything that calms European markets is good for the United States," says Tufts' Drezner.
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