The Daily Beast
By Zachary Karabell
Sept 27, 2011
The global financial system is currently being roiled by one thing and one thing only: the fate of Europe. This past weekend, high-level meetings of both the International Monetary Fund and the G20 nations took place in Washington, and the predominant focus was on Europe and whether the nations of the European Union and the euro zone would be able to stave off what increasingly appears to be a make-or-break crisis over banks, the sovereign debt of Greece, and the stability of the international financial system.
The markets—save for a rally on Monday—have been placing their bet, and it is a decisive no. For a change, this isn’t about the United States, or the size of the American national debt, or for that matter about Obama and the Tea Party. It is about Europe (and for all those who believe that the entire global financial system hinges on America, sorry, this one really is about Europe and its implications for the cost of mortgages in Eureka and small-business loans in Athens, Ohio).
The assumption in finance land is that Greece will default on its debts, and that will then trigger a financial crisis to rival, if not surpass, what happened three years ago. Mavens such as George Soros have predicted as much. But while the risk is undeniable, it is just that—a risk. It would be foolish to ignore, but as the panic spreads, it is increasingly clear that it is just as foolish to assume that all this is a done deal and that incalculable pain lies ahead. Contrary to what many are now predicting, Europe—reeling though it is—will not implode.