The Week-

Is another global financial crisis on the horizon?

Investors are increasingly worried that an escalating political crisisin Italy could lead to a populist, euroskeptic government taking power. As a result, there’s rising uncertainty about whether the country might eventually abandon the euro currency zone or default on its giant debt pile. To make things worse, the Trump administration continues to toy with the idea of a trade war with Europe and China. That would be the last thing the global economy would need if the Italian situation deteriorates further. Debt crises and trade wars are a toxic combination.

To fully understand the risk, it’s helpful to recall that before there was a Brexit, there was the threat of Grexit. There was widespread concern a few years ago that Greece’s government debt crisis would force it to exit the eurozone, and that such a shock departure would be a crushing blow to both the broader European economy, in the middle of recession, and the American economy, which was still recovering from its own downturn.

[THE WEEK]

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