Uh Oh (Again)

The news from Europe has not been good for some time now — but today may be a turning point into even more negative territory.  As the United States enjoyed the Labor Day holiday, equity markets across Europe plunged by an average of 4 percentGermany’s DAX took the hardest hit, falling by more than 5 percent.

It’s not hard to understand why European investors are troubled.  Greece, Spain, and Portugal all are struggling with serious debt problems, and recently Italy, one of Europe’s biggest economies, also has tumbled into distressed territory.  In the meantime, the large, more solvent northern European countries — particularly Germany — have had to prop up their profligate southern European partners.  Germany’s financial support of free-spending Eurozone countries hasn’t gone down well with German voters, who delivered a stinging rebuke to the ruling party in regional elections.

Interestingly, some political leaders in Germany and elsewhere seem to see the ongoing problems as a reason for an even closer political and economic union between the nations of Europe — whereas European citizens, in contrast, appear to be yearning for more control over the destinies of their own countries.  The depths of the Eurozone debt problems are not yet fully understood, and analysts wonder how much worthless debt is held by European banks and whether the piecemeal bailout efforts will ever staunch the outflow of investor confidence.  Given all of these circumstances, it’s not hard to foresee more hard times ahead in the Eurozone.

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