It should be no surprise to anyone that we are more connected with our brothers across the ocean than ever before. With the Internet and various treaties and whatnot, it is now possible for me to order olives in Greece and have them delivered, here, next week. While this is sweet, this benefit also comes with a downside. Our financial markets are more interconnected than ever. This means it actually matters what happens in the European Union. If Europe falls into a deep, deep recession, our economy will stagnate. (I know some of you are asking how it could stagnate even more, but take my word for it, can.)
The news out of Europe is really awful:
The government of Prime Minister George Papandreou teetered on the verge of collapse on Tuesday, threatening Greece’s adherence to the terms of a new deal with its foreign lenders and plunging Europe into a fresh bout of financial turmoil.
Several lawmakers in the governing Socialist Party rejected Mr. Papandreou’s surprise plan for a popular referendum on the Greek bailout, raising the possibility that he will not survive a no-confidence vote scheduled for Friday that depends on his holding together a razor-thin parliamentary majority. Mr. Papandreou was holding an emergency cabinet meeting Tuesday evening to save his government, but the opposition and some members of his own party were calling for new elections immediately.
The impasse in Athens seemed likely to delay — and perhaps scuttle — the debt deal that European leaders reached after marathon negotiations in Brussels last week. Financial markets cratered on Tuesday for the second straight day, wiping out the gains since the Brussels deal was announced last week. Some analysts said that Greece was now coming closer to a messy default on its debt, and perhaps a departure from the zone of 17 countries that use the euro as their common currency.