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Turbulence from Europe
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In case you were beginning to think world economic markets were settling into some quasi-stability, and that rays of sunshine had pierced the clouds of economic gloom and doom, please turn your attention to Europe.

In Greece, voters decided that austerity was not an acceptable condition for resolving their economic problems, and perhaps that autonomy was preferrable to remaining in the European Union. However, the variously elected parties so far have been unable (unwilling) to form a coalition government, and prospects are good that another election might be required.   

France also held elections, replacing Nicolas Sarkozy with François Hollande as president. In essence, the French replaced a president who favored austerity and debt forgiveness for one promoting economic growth.

And in Germany, state-level elections in the western region Sunday favored center-left candidates, weakening support for Chancellor Angela Merkel, who has had a leading role in managing efforts to resolve the European financial crisis.  A week earlier, national coalition parties lost power in local elections held in the north.

At the end of May, Irish voters will decide whether to approve a European Union treaty intended to control nation’s annual deficits and longer-term debts. Even if ratified by at least 12 EU nations, the treaty might already be outdated, according to some observers.

All of this again prompts questions about whether or not the euro will survive, not to mention to potential economic effects – short-term, and perhaps even longer. Perhaps it will reduce the emphasis on austerity and increase attention on investment in growth; perhaps a more perfect balance will be attained.

Meanwhile, in London, traders in JP Morgan’s investment office in London lost USD 2 billion in approximately six weeks in a hedging strategy that soured. That reawakened nightmares about rogue traders and risky investment schemes. In this instance, the monetary loss might be less significant than the resulting concerns and questions about the adequacy of banking and investment regulations.

 

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