In 2008 Barack Obama was propelled into office largely by a financial crisis. In 2012, he might find that what goes around in politics comes around, as his bid for reelection risks being thwarted by yet another financial crisis. The main difference between then and now will be that this crisis did not originate in the U.S., but in Europe. And it will be one over which President Obama has no control.

Judging by recent events, the euro zone's end-game may not be far off. Greece's economic and fiscal reforms appear to be seriously off track, and the debt crisis has now spread from Greece, Portugal and Ireland to Spain and Italy. These latter two countries are aptly described as being both too big to fail and too big to bail.

Compounding matters is a growing German backlash against future bailout packages. This popular pushback is constraining Chancellor Angela Merkel's room to either increase the size of the euro-zone bailout fund or to propose a euro-bond issue commensurate with the size of these countries' financial problems.

"This overexposure to the European banking system should be keeping Mr. Obama awake at night."--Desmond Lachman

To make matters worse, there are now clear signs of major economic slowdowns not simply in France and Germany but also in the U.K. and the U.S. This risks making it all but impossible for the euro-zone's peripheral countries to export their way out of economic trouble.

A European failure to contain its debt crisis would be a monumental electoral setback for Mr. Obama. This is not just because Mr. Obama's governing and economic philosophies are closely associated with the European economic model. Nor is it simply because Europe is a major U.S. export market. Rather, it is because a European failure is bound to have huge ramifications for U.S. and global financial markets.

If there is any doubt on this score, all one need do is consider the U.S. financial system's massive exposure to the European banks. In a recent survey, Fitch found that, as of the end of July, the U.S. money-market industry still had direct exposure to European banks of over a trillion dollars--or roughly 45% of money markets' overall assets. The Bank for International Settlement reports that American banks have loan exposure to German and French banks of more than $1.2 trillion.

This overexposure to the European banking system should be keeping Mr. Obama awake at night. Because those European banks in turn are all too exposed to the $2 trillion sovereign-debt market for Greece, Ireland, Portugal and Spain, and they have yet to recognize the large loan losses that they are bound to experience on their sovereign-debt holdings.

The sad truth is that Greece is all too likely to default on its $450 billion sovereign debt before the end of the year. This would make it the largest sovereign-debt default on record. Greece's talks with the International Monetary Fund have stalled as Athens makes clear that further austerity measures would only deepen Greece's already painful recession.

As recent market pressure on Italy and Spain would suggest, a disorderly Greek default is bound to take Ireland, Portugal, and Spain with it. Officials at the European Central Bank publicly concede that a Greek default would very likely lead to contagion in the European periphery, which could very well trigger a Lehman-style banking crisis in the European core.

As if to underline these concerns, European banks are now cutting back on their lending to Spain and Italy, fearful of the intensifying debt crisis. They are also beginning to show themselves very reluctant to lend to one another. Having lived through the U.S. sub-prime crisis, the Obama Administration has to be concerned bout how a European credit crunch might severely crimp global economic growth.

A Continental debt crisis would not be good for the U.S. economy at the best of times. However, as the recent dismal U.S. jobs numbers underline, these are hardly the best of times for America. The prospect that an already stalling U.S. economy is now to be weaned off themonetary and fiscal steroids to which it has become accustomed over the past two years does not bode well, and an economic shock from Europe is the last thing that the U.S. economy or Mr. Obama now needs.

The 2012 elections will focus on one issue: The economy. Whether or not Mr. Obama has any control over the European factors that are putting the American economy at risk, voters may punish him for them anyway.

Desmond Lachman is a resident fellow at AEI