Americans should worry about Italian debt

A two Euro coin rest on top of a Dollar note

JEREMY HOBSON: And it's all about Italy and borrowing costs are rising as confidence drops. There are fears that Italy could be the next domino to fall in the European debt crisis. The Italian government fast-tracking budget cutting measures this morning to re-assure global investors.

For analysis, we bring in Juli Niemann of Smith Moore and Company. She's with us live from St. Louis as she is every Tuesday. Good morning.

JULI NIEMANN: Good morning Jeremy.

HOBSON: Well, Juli, how concerned are you about this?

NIEMANN: Well, how big a deal is it? It's really Italy's problems are all the same as Greece's -- no jobs, no growth, bloated government bureaucracy. They've got an old population, no immigration and massive tax cheats. But there is a big difference. Italy is the third-largest economy in the Euro zone, so if Greece defaults you're going to see Italy and Spain likely to follow. And we're going to see a banking crisis of the same magnitude that Lehman Brothers collapsed here three years ago. That would send us into a huge tailspin.

HOBSON: But all those factors you mentioned in Italy are things that have been known about for a long time. Why is this coming to the surface now?

NIEMANN: Well, in Europe they've been making very short term decisions for the last year and a half and it's only gotten worse. Now, does it really affect this? Well most of us don't really know or care about Portugal, Ireland, Italy and Spain. We're more concerned about the debt ceiling comedy going on in Congress and not getting our Social Security checks on time. But this could well be a replay of the financial crisis of 2008 that was caused by the spectacular housing bubble and associated debt. So we could see a replay that will really hurt us.

HOBSON: So Italy's a much bigger deal?

NIEMANN: You bet.

HOBSON: Juli Niemann, analyst with Smith Moore and Company, thanks as always.

NIEMANN: Thanks.

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