Below is an excerpt from writings of John Mauldin, <FrontlineThoughts.com> a financial analyst which sums up the choices facing the EuroZone. December 9 is shaping up as a very big day for Europe and world financial markets.
"...Merkel and Sarkozy have told us they will meet Monday and announce a plan on December 9, when the full eurozone meets. Forget bazookas, this needs the equivalent of a howitzer. They are seemingly intent upon rewriting the treaty, which is the only way that the Germans will go along with any major ECB action. But by my reckoning, a few hundred billion, or even a trillion, is not major action, at least not on the level of what will be needed.
The price for German acquiescence will be a loss of sovereignty and the ability to run deficits of any real size for any appreciable length of time for the countries of Europe. Will the peripheral countries go along? Heck, forget them; will Finland go along? This situation has been coming along since the foundation of the eurozone. The early founders acknowledged that a tighter fiscal union would eventually be necessary if the euro experiment were to survive. And eventually is now. As in this month. Time is running out if they want to forestall a credit crisis that would be worse than 2008.
The world is watching, as what happens in Europe will affect us all, in every part of the globe. It could easily tip the US into recession, and it will only be worse for the emerging markets. For Europe, the Endgame is now. We can only hope they come up with a plan that avoids disorderly defaults and a crisis far graver than 2008. They have no good choices, only difficult ones and disastrous ones. Let us hope they choose wisely.
(And for my fellow Americans, note that we will face the same consequences if we do not get our own house in order, and very soon. This is more than an academic observation.)" [emphasis added]
1 comment:
I think you are right and it is just a guess on my part but if Europe does get it's act together i think the US (and China) economies will soar on that headwind. By avoiding collapse of the financial industry and certain aspects of manufacturing (autos) and keeping interest rates low while providing modest stimulus in order to gently support consumer markets and housing we are now poised for growth and I suspect it will be more robust than the political mood suggests. Looking back I believe economist will conclude that the steady and calm hand on the tiller approach of the last few years was the best way to ride out the storm. One caveat to my optimism is that I do not know the odds of Europe getting its act together and if they do not, I think the impact of that will be awful. And much like our own cyclical economy that operates (largely) aloof from political impact (despite claims from politicians that their policies can tame the beast - the economy is like a rabbit and politicians are like the hunter always shooting where the rabbit was) there is very little the US can do to shape European actions.
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