Can Europe Make It All the Way to November?
The European debt crisis took a breather in the summer months as thinner markets and promises of central bank intervention from both the U.S. and Europe bolstered equity prices.
The Obama Administration has to be quietly hoping this rally continues, as the contagion from Europe has the potential to reduce already paltry domestic economic growth. If Europe can hold together the current status quo until November, Obama’s economy might look reasonable, but it seems unlikely that Europe has that long.
As the calendar turned to September, Europe’s debt crisis began to flare up almost immediately. New data from the ECB shows that funding costs for businesses in the European periphery are at the highest level in a half decade. Meanwhile, Moody’s lowered the debt rating outlook for the EU on September’s first day of trading. Neither story implies good things for the already-depressed and uncompetitive economies of the southern portion of the continent.
But the darkest days for Europe might come this fall. Over the next two months, it will be forced to either face the reality that the monetary union is unsustainable, or face certain backlash from a dissatisfied and vitriolic European electorate.