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Italy the Next Victim in Eurozone?

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    What will economic issues mean for U.S.?

  • Duration 4:17
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Our stocks around the world to hard hitting slump today over concerns that Italy.

Could be the next victim in the eurozone debt crisis bad news for Europe's.

Third largest economy joining us is Dennis Berman who is the Wall Street Journal's deputy bureau chief.

Good to see you thanks for in my zeal he we've had our -- sort of focused on Greece and their problem.

Now -- well you know that the problems in Greece are actually far far smaller than the ones in -- And the prices that people are willing to pay for for Italian -- of the government bonds they continued to fall and fall and that means potentially.

Real problems for Italy for its banks and -- -- sort of think down the line and start thinking about.

The Euro itself what happens is if Italy's economy takes a major hit what happens of the Euro.

Well yeah there's lots and is being discussed right now but the Euro is in probably.

Greater threat than it has been since its creation not that long ago in 1999 and so with the Euro currency under threat.

You have real potential instability across Europe not just in Italy but Spain is having some problems right now and that -- the question up.

Germany -- France how long can -- continue.

The support and put billions of dollars into the struggling countries what does it mean for us here in the US well it's -- -- good news and bad news.

Bad news is that further instability in Europe just tends to translate over here to America.

And when that happens people they don't when invest in stocks they don't want to put their money to work they get very risk averse we sought a 2008.

To -- -- to the worst degree.

If there's a silver lining it is that people will want to own the US government bonds they'll seek the safety of the US market and that might keep interest rates close and you can go on about spending.

However got a real complication is congress.

Which is you know this.

Debating about the debt limit and therefore the even the safety of the United States.

It's a wanted to question what what.

And ask you about that because we just heard from the president in the last ninety minutes or -- he says it did a deal will get done a deal must get done.

But not everybody so convinced there are Republicans out there even some Democrats who don't necessarily think it would be such a bad thing.

If -- deal was not -- to raise our debt limit and let me just ask you to respond this is secretary -- of the treasury Timothy Geithner on CBS yesterday morning tickle us.

First of all the people who say that.

We could take the risk in the faults there's no responsible leader.

Could argue Soviet credible panel responsible later -- as -- -- secretaries like that apple does seem to be the prevalent view amongst many not -- -- not -- -- -- who's not -- -- and some Democrats -- again -- that political moment you're trying to get attention they -- really amazing things.

But there's no credible argument no responsible leader.

Would say the United States America for the percentage tennis history should not pay its bills -- this obligations that would be catastrophic for the economy.

Is he right catastrophic.

I think it's pretty close to being right now it.

Look what the markets are telling -- now.

The markets are telling you it does they do not believe that the -- this coming -- politics is one thing and everyone's gonna job on one way or the other.

But the markets right now the market for for government debt.

Is as strong as it's it's been for a long time in part because of the fears in Europe but also because people at least right now.

Don't view it as a credible threat it in and Geithner I think is correct we as a country need to stand behind.

Our debts and if we don't.

I think 'cause catastrophe or not the consequences could be severe.

Dow is down to the -- in the bottom right you know almost a 145 points this morning him what do you think the market's response it is.

As we get closer and closer to this August 2 deadline if no deal is reached and -- out of the flip side.

What -- the markets do if and when a deal is reached.

Well I think right now the markets are building in that some deal -- be -- finally bridge the gap and and I don't -- expect necessarily a lot of movement positively if they do that.

But should things get worse as time goes on and you know how Washington works right of course the oppressive to the -- life.

We could see some real instability and and and the good in the bond markets.

-- in the stock market.

Deputy bureau chief for the Wall Street Journal by the same parent company as Fox News Dennis Berman Dennis thanks so much pleasure seeing you --

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