As of last Friday, Spain is now the biggest threat to the euro zone, which has offered the country an extra year to reduce its budget deficit on conditions that it installs further financial-sector reforms and recapitalizes its downgraded banks. Italy will not be given the same extension, since its economy is forecast to begin growing again next year. The EU also called for a banking union to help break the cycle of indebted states’ bailing each other out. Meanwhile, the U.S. Treasury sent a top official to discuss plans for managing the debt crisis in Germany, Spain, France, and Greece, which would face an economic catastrophe if it were forced out of the euro.
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