World economic slump could affect Ind. exports

In 2010, Greece’s unemployment rate rose to 12 percent. The country made $40 billion in spending cuts and assigned a lowest-possible credit rating, according to the CIA World Factbook.

While American leaders may be caught up in America’s own financial troubles, Volodymyr Lugovskyy, an assistant professor in the Department of Economics, said this economic turmoil abroad should be of at least some concern to Americans.

“I guess the main thing is, we sell goods to foreign countries,” Lugovskyy said.

And when economies are lagging abroad, there are fewer exports to those countries that America depends on for trade, he said.

According to the European Commission, the European and U.S. economies account for half of the world’s gross domestic product and for nearly a third of the world trade flows. In 2010, the United States exported about $227 billion  worth of goods to Europe and about $175.5 billion worth of services.

The issue of international trade also affects Indiana trade. InContext, a publication from the Indiana Business Research Center in the Kelley School of Business, states that Indiana’s main exports are vehicles and vehicle parts, industrial machinery and pharmaceutical products. Top countries the U.S. exports to include Germany, Canada, Mexico and the United Kingdom.

If other nations’ economies lag, Lugovskyy said, it will influence how much the U.S. — and Indiana on its own — can export, and therefore how the American economy performs.

Another factor to consider, Lugovskyy said, is the strength of various currencies abroad. He said that although the U.S. is in competition with Europe economically, “we don’t want the euro to perform too badly.”

If the euro performs poorly, a decrease in demand for U.S. goods will occur again, which would hurt the U.S.

Lugovskyy said the reason to pay attention to Greece in particular isn’t necessarily to see how its economy is doing, but rather to see how the European Union responds.

“The question now is how much other European countries want to rescue Greece,” he said.

This could be costly, again decreasing the desire for U.S. goods. Two of the nations that would need to bail out Greece — the United Kingdom and Germany — are also top importers of goods from Indiana, according to the Indiana Business Research Center, although the center was unavailable for comment.

Lugovskyy said there is a small chance Greece will be kicked out of the European Union. However, he also noted the question of Greece’s status isn’t necessarily the most important issue to be concerned about right now from an American perspective.

The biggest concern with Greece, he said, is how this will affect trade with other countries in the EU.

“Maybe that’s why we should pay attention in Greece,” Lugovskyy said.

— Hannah Smith