Greece’s financial crisis won’t bring down U.S. markets, but it’s a stark reminder of how bad fiscal and government policies can cripple a nation.

University of Central Florida economist Sean Snaith‘s latest national forecast, released this morning, outlines how Europe’s debt crisis and the flailing Euro – along with the BP oil spill and still-weak labor markets – have riddled the U.S. economy’s recovery with uncertainties.

“While the U.S.’s fiscal straits may not be as dire as Greece’s, the crisis in the EU is a cautionary tale that unchecked government deficits and high national debt can lead to serious and painful consequences,” said Snaith, the director of UCF’s Institute for Economic Competitiveness.

Avoiding Greece’s failings means backing off notions of a “nanny state” that can extend benefits for all without raising the money to pay for them, he adds.

Snaith, like many other economists, also predicts a slight increase in Thursday’s revised reading on first-quarter U.S. Gross Domestic Product (GDP), expected to have grown at a 3.3 percent annualized rate instead of the initially reported 3.2 percent rate. (That rate, he says, will decrease as the year goes on.)

Yet tomorrow’s anticipated good news comes with confusion over problems of joblessness and continuing foreclosures. Snaith describes it as a clash of sorts that will ultimately decide our fiscal futures over the next three years.

“What we’ve got are opposing tectonic forces in the economy colliding,” he said. “Pent-up demand from a long, difficult recession meets a trio of markets pushing in the other direction – credit, housing and labor. The outcome of this clash will determine the economic landscape.”

Snaith’s entire forecast is available at the Institute for Economic Forecasting.

Other highlights of his report include:

  • The expansion of the economy during 2010 will be about 2.8 percent as consumers are still struggling with the balance sheet fallout and labor market scar leftover from this ‘great recession.’
  • The road to asset bubbles and inflation is paved with good intentions: The Federal Reserve should not use the Greek crisis and labor market weakness as excuses for delaying interest rate hikes.
  • Continuing foreclosures fed by persistent unemployment continue to add to housing inventory, feeding a surplus that continues to put downward pressure on prices, which are expected to fall throughout 2010.
  • Unemployment, a lagging indicator of the business cycle, will remain near 10 percent throughout 2010 before gradually falling to 7.8 percent by the end of 2013.
  • The U.S. economy had shed in excess of 8.3 million payroll jobs through the end of 2009. Payrolls will not reach their pre-recession levels, and those jobs will not be recovered, until mid-2013.
  • Snaith is a national expert in economics, forecasting, market sizing and economic analysis who authors quarterly reports about the state of the economy. Bloomberg News named Snaith as one of the country’s most accurate forecasters for his predictions about the Federal Reserve’s benchmark interest rate, the Federal Funds rate.

    Snaith is also a member of several national forecasting panels, including The Wall Street Journal economic forecasting survey, the Associated Press economic survey, Western Blue Chip Economic Forecast panel, the National Association of Business Economics Quarterly Outlook Survey Panel, the Federal Reserve Bank of Philadelphia’s Survey of Professional Forecasters, Bloomberg U.S. Economic Indicator Survey and USA Today Economic Survey Panel.

    The UCF Institute for Economic Competitiveness’ mission is to expand public understanding of the economy by convening business leaders, scholars, policy makers, civic groups and media to discuss critical issues.