What Happens if Italy's Economy Collapses?

Without business growth, the cycle of retraction would continue. Business wouldn't spend and hire, so people would not have money to spend. It's a cycle that repeated itself from 2007 to 2010. Another recession would kick-start the cycle again.

All hope not lost. Despite this somewhat dire outlook, there is hope that Italy can pull through this crisis and get its fiscal house in order. The new government says it's committed to reform. The strength of this commitment will ultimately determine the fate of the American economy.

And while Germany and France might be growing tired of helping poor neighbors, they have little other choice. As these countries learned with Greece, if Italy fails, they'll go down right along with it. "It's not a real possibility that they'll kick Italy out," said Erik Jones, professor of European studies at the Johns Hopkins University SAIS Bologna Center. "They can't let Italy go down the tubes."

Clarified on 11/18/2011: A quote by Erik Jones in a previous version of this article implied that Germany and France were considering kicking Italy out of the euro zone. Jones does not believe Germany and France are considering expelling Italy.

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