The recent improvement in the incoming economic data, particularly in relation to the labour market, has raised hopes that the US economy could shrug off the crisis in the euro-zone and finally enjoy a more vigorous self-sustaining recovery. But the US economy has already been at this point twice before since the recession began, in early 2010 and then early 2011, only for growth to fall back sharply. Domestic economic conditions appear to be on a firmer footing this time around, with signs of genuine improvement in housing and credit. Unfortunately, we expect the US economy to be sideswiped by an even bigger external shock this year; with a high probability that Greece defaults and also exits the euro-zone. In a worse case scenario, sovereign defaults in Europe and the break up of the single currency could cause a big enough ripple in the global financial system to trigger a renewed credit crunch in the US.