Six Reasons Why the European Debt Crisis Matters to You

Riots in Greece, unemployment in Spain, emergency summits in Belgium — what do these far-away events of the European debt crisis mean to you? Quite a bit. As our economy grows more global and interconnected, panic across the Atlantic can help determine the safety of your job, the balance of your bank accounts and the security of your retirement. Often it's for the worse, but there can be an upside too.

See also: How much U.S debt is owned by foreign countries?

Read on for six reasons why the European debt crisis deserves your attention.

Protesters clash with riot police during a general strike protest in Athens, Greece. — Corbis

1. The crisis means fewer jobs in America.

When Whirlpool, the manufacturer of dishwashers and refrigerators, announced its quarterly earnings in January, it noted that sales in Europe had fallen 7 percent. The financial troubles there "led to weak consumer demand across the euro zone," the company said. Translation: When consumers in Europe close their wallets, American manufacturers feel pain. They have trouble hiring new workers or keeping on the ones they have.

The eurozone — the 17 countries that use the common currency — is America's third-largest export destination. Most economists believe that decisions by many European governments to drastically cut spending and boost tax collections will tip Europe into recession this year.

States like South Carolina and Washington could be particularly hard hit. The Wells Fargo Securities Economic Group, for instance, estimates that one-third of South Carolina's exports head to Europe. And two European airlines have just gone bust because of the credit crimp, meaning their aircraft can be purchased by other carriers. That reduces demand for the new planes that Washington-based Boeing produces.

Some U.S. economists believe Europe could cut 0.4 to 1 percent off U.S. growth in 2012 — at a time when our domestic economy is just beginning to show life after a long downturn.

2. U.S. banks are heavily tied to Europe, and could cut back on making the domestic loans that fuel U.S. expansion.

Five of the largest U.S. financial institutions, including JP Morgan Chase and Goldman Sachs, have more than $80 billion invested in Greece, Italy, Ireland, Portugal and Spain, the most economically stressed nations in the eurozone, according to estimates by the New York Times.

Banks have moved aggressively to scale down their European holdings. Still, fear of having to shoulder losses in Europe is making these banks less willing to make new loans at home, even if borrowers have excellent credit. This is already making it harder for U.S. utilities, mining firms and other capital-intensive industries to finance new construction and real estate projects.

Likewise, Americans who work for troubled foreign banks are more likely to face layoffs if those banks are forced to restructure.

Next: Will the debt crisis lower French wine and German car prices? >>