debt interest

In 2011 the US government spent 3.6 trillion and took in 2.3 trillion for a net deficit of 1.3 trillion. The government was allowed to borrow that difference at 0.25% interest which is a historical low. In contrast Italy is currently paying 7% on their loans. This is happening because Europe is worse off than the US and so people looking for a safe haven for their money are purchasing US bonds. The greater the demand for the bonds the lower interest the government has to pay to attract borrowers. If Europe recovers from their current dire situation then the demand for US bonds will decrease and the interest rate will increase. If on the other hand the European situation gets worse and they default then the US will be hurt because 23% of our exports go to Europe.