Timing is everything when it comes to the Euro Crisis. It's terribly obvious that the situation must come to head and that a big change in fiscal policy will be required to address the debt problems in Europe, not to mention the USA. The problem is that very few Europeans are willing to accept what this means to their lifestyle and the sacrifices they must face together.
At the same time, if the Europeans were to take the extreme measures they need to in order to get their annual deficits down to a reasonable level, it is fair to say the drag to their economy would send tax revenues into a free fall thereby countering in large measure their budget cuts effects on the deficit. Without the means for fiscal stimulus, the Euro is dammed if they do and dammed if they don't. The situation would appear hopeless. But maybe not!
Europe does not operate in a vacuum, they operate in a world economy. The answer to Europe's extraordinary strains and dire need for growth could come from the emerging nations, especially China and India. They could supply the lift to the world GDP that would pull Europe through. The key is the timing. Can those growth regions put their foot on the pedal to increase their domestic demand soon enough and fast enough to satisfy investors that all hope is not lost for Europe.
After some 15 major meetings of Europe's leaders it's painfully obvious that they can not lift themselves out of their mess on their own. A coordinated world effort is required. I'm not talking about the world "bailing out" Europe by paying their debts or loaning them more money!! That's not a solution and the proverbial can has been kicked to the end of the road. Countries that have the means to encourage growth have to work together to do so and to open their markets. Supply from Europe and the USA will help keep a lid on inflation in the growth regions as their domestic economies grow. And, seeing demand from Asia, Africa, South America, the Middle East, etc., will help Europe and the USA to take the fiscal austerity steps we need to in order to get our budgets under control with less concern about triggering a deep global recession.
I believe this kind of coordination is the answer. The question is the timing! Can we time our efforts in a coordinated way, or must there be a crisis and much less orderly series of events and process? That's anyone's guess. Get it right - make a fortune. Get it wrong - take a beating! Therein you have the uncertainty facing investors around the world!!
