The threat of escalation of Europe’s sovereign debt crisis continues to make me wake in a cold sweat. The focus has so far been on Greece and the Franco/German attempts to manufacture a solution that protects French banks whilst being just about palatable to the German parliament and populace. But Italy is the key — surely no central fund can be big enough to bail out an Italian default. So much depends on sentiment and credibility. Can the Italian coalition government agree an action plan that satisfies the Berlin/Paris axis and financial market expectations? The leader of the nationalist Northern League has just been quoted saying that he won’t accept German demands to increase the pension age to 67. Resentment about the loss of economic sovereignty has already exploded on the streets of Athens, how long before Lisbon, Madrid, Dublin and Rome follow suit? At best we are in for a few more months of financial turbulence… At worst?
|This post was part of the special feature about Our Scariest Risks, published October 31, 2011. The feature also included these other risks:|