I’ve been following the debt crisis in Europe moderately closely, but haven’t posted anything about it of substance.
But things appear to be coming to a head.
And, since everything that has happened in the wake of the 2008 financial crisis has turned out to be “worse than expected”, I’m not holding out much hope for a solution. The piecemeal way in which European leaders have managed the growing crisis hasn’t spurred much confidence either, although the stock markets seem to tick upward with any hint of a comprehensive deal.
I’m going to the dark side on this one: I’m predicting that Greece will default and will abandon the Euro. That will create financial turmoil throughout Europe, forcing the European Central Bank and the major powers to re-examine their emphasis on forcing destabilizing spending cuts in Greece and other countries. If the ECB and the major powers refuse to change course, we could — repeat, could — see the entire Euro project collapse.
There’s a major summit meeting this evening in Europe. The markets and governments are expecting some sort of a
European leaders head for financial summit with no solution in sight
German Chancellor Angela Merkel told her parliament ahead of a key vote on Wednesday that deep changes must be made to Europeâ€™s economy if the euro is to hold together as currency. But she offered few concrete details about the steps she will take to protect it.
The lingering uncertainty underlines the likelihood that a major summit planned in Brussels later on Wednesday will fall short of achieving the comprehensive plan that Merkel and French President Nicolas Sarkozy had promised earlier this month.
From the NYT’s Europe Faces New Hurdles in Crisis Over Debt:
New fissures and disagreements emerged on Tuesday on the eve of a European Union summit meeting promoted as the moment for agreement on a comprehensive solution to the two-year-old euro crisis. Crucial financial measures were left unresolved, and Prime Minister Silvio Berlusconi of Italy faced strong opposition inside his governing coalition to major changes demanded by the Europeans.
The overall euro deal being discussed is complicated, including a deep restructuring of Greek debt, an injection of new capital into European banks made vulnerable by exposure to sovereign debt and an expansion of a bailout fund so that it can ward off a financial panic in the large economy of Italy as well as in tiny Greece and Portugal.