In the ongoing European debt crisis, Italy’s economic woes now rival that of Greece, and these overseas problems could spell trouble for the United States.

While yields on Greek debt have reached levels well beyond what Greece could ever afford to sustainably pay, yields on Italian debt have been rising above the historically dangerous level of seven percent, indicating that Italian debt is increasing in risk.

The Greek government has been ousted and replaced with an interim government that will presumably approve the bailout package that European leaders negotiated last month in which 50 percent of all Greece’s privately-held debt would be erased. The previous prime minister, George Papandreou, called for a voter referendum on the bailout package, which risked being voted down and causing a “hard default” on Greek debt.

Following the Greek government’s exit, Silvio Berlusconi resigned as prime minister of Italy after the passage of the latest package of austerity measures. Mario Monti, a former European commissioner, has been selected to lead the new government that will enact reforms and more austerity measures.

While most of the recent publicity has focused around Greece and Italy, the rest of Europe and even the United States are all suffering from similar problems. While Greece’s gross debt of 165 percent of GDP and Italy’s of 121 percent of GDP (as reported by the latest International Monetary Fund report) far outpaces most other European countries, many of the largest European countries also have their own problems.

Since its property bubble popped and unemployment skyrocketed to over 20 percent, Spain has been widely seen as the next in line to need a bailout after Italy. Spain’s economic growth has also been significantly weaker than France or Germany. Despite this, France has also been targeted as a possible threat to the global financial system due to over 50 percent of its government debt being held overseas, putting France in the same club as Portugal, Greece and Ireland, all of which have received bailouts. Rumors are circulating that France’s AAA credit rating is at serious risk.

Although Germany is widely perceived to have the strongest economy in the Eurozone, it too has been criticized for having a national debt exceeding 82 percent of GDP, over 40 percent held overseas, and to be too heavily reliant on exports to China which has recently shown signs of slowed growth.

Similar issues caused government gridlocks in the United States this summer as Congress struggled to come to a long-term deal to reduce the national deficit. The same report from the IMF predicted the deficit would reach 100 percent of the GDP by the end of 2011 and is predicted to increase to over 130 percent of the GDP by the end of 2012. Additionally, the United States recently lost its AAA credit rating from Standard & Poor’s and the outlook for its credit rating is rated at negative.

“We had this financial crisis in 2008, and… I’d say we’re in a depression, really,” said Ranjit Dighe, an economics professor at Oswego State and chair of the department.

Dighe, who received his Ph.D. in economics from Yale University in 1998, went on to explain just why the current crisis in Europe should be a concern for people in the United States right now.

When the euro was originally formed, the forming countries signed the Maastricht Treaty, which made the requirement that any countries that wanted to join the Eurozone “had to keep their debt within levels that were deemed manageable.” This agreement was not kept, as some countries such as Italy and Greece utilized creative accounting to run up higher deficits while still meeting the requirements of the Euro. None of this mattered very much while the global economy was strong, but that changed in 2008.

“The main thing is that the economy changed…and it’s just a political thing not to use the word ‘depression.’ It just means a prolonged period of very weak economic activity, and that’s what we’re in,” Dighe said.

He also noted that this crisis could very easily begin to affect the United States’ economy. “If the Euro falls because of this [debt] contagion, then European goods become cheaper and U.S. goods become relatively more expensive. [U.S.] Net exports would go down. And also as Europe goes deeper into recession, they’ll just be buying less stuff, period, including less stuff from us.”

Another threat to America’s economy comes from European banks that have been going through their own crisis that is connected to the sovereign debt crisis in Europe.

“A lot of European banks seem to be going through some sort of funding crisis…and bank contagions tend to be worldwide,” he said. “If something is wrong with Europe’s banks, then people are going to assume that something is very likely wrong with America’s banks.”