The Global Future of Europe’s Crisis
The stock of financial assets worldwide has grown so large, relative to national income flows, that financial-market movements can overwhelm most countries. Indeed, the European crisis is a mere foretaste of the central political debate of the first half of the twenty-first century: how to resolve the tension between global markets and national politics.
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WASHINGTON, DC – It is now clear that the eurozone crisis will continue well into 2012, despite early February’s recovery in stock markets. Negotiations between Greece and the banks over Greek sovereign debt may yet be concluded, but sufficiently wide participation by banks in the deal remains very much in doubt. Meanwhile, the International Monetary Fund has raised the issue of official-sector debt reduction, possibly even by the European Central Bank, sending the message that a “haircut” for private bondholders will not be enough to return Greece to financial sustainability.