The debt crises in the US and Europe could make it harder for Bermuda to dig out of what Premier Paula Cox warned could prove to be “a long floor U-shaped” recession.Economists said the Island could see fresh hits to tourism, international business and the jobs market as a new wave of economic uncertainty takes hold in the US and Europe.There was positive news yesterday after markets rallied on news the Federal Reserve pledged to keep its key interest rate at its record low of nearly zero through the middle of 2013.However, economic experts we spoke to said tourism, already at a low point, could be in for a particularly rough ride as Americans may again opt for so-called staycations and investors continue to balk at financing new resorts.They said international business was also not immune and job growth may continue to stagnate.However, Premier and Finance Minister Paula Cox assured last night that the Government has been working to strengthen the economy. Premier Cox said the uncertainty in the financial markets is “disturbing”, but not totally unexpected.She outlined a number of actions by the Government to support a recovery, including looking at developing ties with emerging markets.She also noted that because of precautions already taken by Bermuda’s banks, their aggregate risk asset ratio as of March 31, 2011 stood at 21.3 percent, which she said is “significantly above the internationally recommended standard of eight percent”.The Premier added: “The Bank of Butterfield, which the Government assisted by guaranteeing $200 million of its indebtedness, recently reported two profitable quarters in a row. “She further stated that Bermuda’s tourism market may stand to actually benefit if the US dollar shows signs of weakness, particularly in continental Europe and the UK “as more Americans are likely to favour holidaying in a dollar-denominated economy rather than incur less favourable exchange rates further afield”.In addition, she said, “there is the continuing interest in Bermuda as a premier financial services domicile and there are ongoing expressions of interest in Bermuda on the tourism development front. However the situation is extremely fluid.”She said the recession is likely to be a long floor U not a V “meaning we will probably have another few quarters or more of slow growth because of a slowdown in aggregate demand typified by a very slow growth in consumer spending. Given the direction of trade for Bermuda this means that there will be some dampening of growth.”Nathan Kowalski, chief financial officer of Anchor Investment Management, said in his view any renewed global economic weakness “would exasperate the current situation” in Bermuda. “Any growth slowdowns or global recessionary retrenchment would affect the Island again with somewhat of a lagged effect,” he said. “Tourism is very economically sensitive and highly discretionary in nature. Escalating global unemployment rates and future labour market weakness could negatively affect the tourism industry on the Island with lower demand and continued price sensitivity.”Shadow finance minister Bob Richards agreed. Mr Richards, also president of Bermuda Asset Management, said: “The situation in Europe is more serious than that of the US but it will have less of an impact on us than events in the US.“Both situations have one thing in common, however, and that is opti “Both situations have one thing in common, however, and that is optimism and confidence in the economic recovery on both sides of the Atlantic have been called into question.“This will cause people to be more risk averse with their decisions. On the consumer level they may take a ‘staycation’ instead of a Bermuda vacation. At the institutional level investors would be less inclined to invest in, say, a new hotel resort in Bermuda, than before because of an elevated level of uncertainty.”Mr Richards added: “Bermuda is still experiencing recessionary conditions, so there’s no question of a double dip but rather a continuing slow decline (as) there is little evidence of a rebound having taken place.“However, he cautioned it is important for people not to overreact to what is going on in the US.“Short term US debt, i.e. Treasury Bills, remain at the highest rating and the downgrading of the longer term US Treasury bonds by only S&P is not going to affect the calculation of risk weighted reserves for banks, so the impact on the banking sector will not be severe. The global financial system is functioning normally in contrast to the fall of 2008 when the system seized up. Most insurance/reinsurance company assets are already generally invested in low risk securities and are not likely to be seriously impacted by the S&P downgrade.”Mr Kowalski said the international business sector was not immune though.“The low interest rate environment is putting a great deal of pressure on certain segments of the banking industry that rely on cash funds and interest spread income,” he said.“Lower asset prices also affect the profitability of all asset management divisions. These factors can greatly pressure local bank returns and subsequently profitability measures. Furthermore, low fixed income yields pressure reinsurance investment income, net income growth will need to come from prudent underwriting.“Ultimately, job growth may continue to stagnate if the growth outlook turns negative and confidence is not restored. Corporations in general are reluctant to hire and expand with additional capital commitments if the there is great uncertainty.“Bermuda companies and subsidiaries are not any different. In periods such as this, sometimes the best way to grow is through consolidation.”Mr Richards said as far as the Bermuda Government is concerned, it “should be acting on the advice the Opposition has been giving them for the past three years, not paying lip service to it”.“Government excesses are not going to be bailed out by surprisingly strong revenues, so they need to eliminate the excesses,” he said. Mr Richards urged Government to:l Cut wasteful government spending, “particularly spending on high priced consultants, and unnecessary and extravagant travel”.l Freeze the size of the civil service.l Reform the Department of Planning “to increase the throughput of projects so that those projects can actually start and employ more Bermudians”.l Get rid of those “discriminatory policies” related to spouses of Bermudians as this policy is also “dampening activity in the real estate and construction sectors”.