The Financial Landscape: Italy Under Stress; U.S. Social Safety Net In Danger


A roundup of news from around the world of finance:

The Boot Gets Kicked: As the eurozone sovereign debt crisis continues, focus is shifting to Italy -- the continent's third-largest economy -- as the next potential victim. "In what Italian media dubbed 'Black Friday,'" CNNMoney reports, "Italian stocks and bond yields plummeted at the end of last week, and trading was suspended for some Italian bank stocks following sharp sell-offs." The chaos resumed on Monday, "amid fears that those banks won't be able to pass eurozone stress tests -- the results of which will be published Friday."

Bloomberg reports that Consob, Italy's market regulator, took emergency action against short selling after Black Friday, when "the country's benchmark stock index fell the most in almost five months and bonds tumbled on investor concern the nation may be the next crisis victim." Eurozone fears were expected to hobble U.S. stocks on Monday, but Bloomberg points to a potential silver lining for Americans -- "The best currency forecasters say the dollar's 13 percent slide over the past year is coming to an end as Europe's deepening debt crisis discourages bets against the world's reserve currency."

Bye-Bye, Billions in Benefits:
Citing Moody's (MCO), The New York Times reports that nearly 20% of personal income in the U.S. derives from government benefits -- unemployment, food stamps, Social Security and disability -- and that, "by the end of this year ... many of those dollars are going to disappear, with the expiration of extended benefits intended to help people cope with the lingering effects of the recession." In all, Moody's estimates that the drying-up of certain benefits will cost U.S. consumers $37 billion this year. The problem, of course, is that this money -- which tends to be spent immediately on goods and services -- is vital to the health of the faltering recovery: According a Labor Department study, "every $1 paid in jobless benefits generated as much as $2 in the economy." On the other hand, the Times quotes a director at the Michigan Chamber of Commerce and an economist at the Cato Institute as arguing against any additional extensions of unemployment benefits, which they claim place counterproductive tax burdens on businesses and discourage the jobless from looking for work.

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