Carnegie Endowment for International Peace
The problems that led to the crisis in Europe go beyond just fiscal profligacy and will take a long time to correct. Though the euro will likely survive the adjustment, the crisis could still have a profound effect on the global economy.
While the recently announced Eurozone support package suggests the possibility of a new era of fiscal coordination across Europe, it will only succeed if the countries in need of aid undertake far-reaching policy changes.
Recent cuts to the credit ratings of Spain and Portugal indicate that the crisis in Greece is spreading across Europe. Given the financial market pressure on Greece, debt restructuring appears inevitable, but it remains to be seen when it will occur.
As the problems in Greece intensify, the EU and IMF are preparing a support package to prevent the crisis from spreading to Portugal, Spain, and other European countries.
The recent spike in Greek bond yields indicates that markets have not been reassured by European leaders' pledges to support Greece. Unless more decisive, detailed plans are announced, the Greek crisis will continue to get worse.
As the Euro crisis continues to play out in Greece, troubled economies in Europe face years of slow growth and deflation unless European Union leaders overhaul fiscal and monetary policy.
Greece is now facing a sovereign debt crisis that is calling into question the viability of the Euro itself. While there are no easy solutions to this crisis, both Germany and the IMF must provide Greece with the support it needs.
As the U.S trade deficit becomes increasingly politicized in the face of high unemployment and a global contraction in demand, there is an increasing likelihood of trade tensions with net surplus countries, especially China.
The passage of a UN Security Council resolution on nonproliferation and disarmament is the first evidence that the Obama administration's strategy of achieving an eventual "world without nuclear weapons" is paying off.
Policy makers who only 18 months ago identified Arab foreign investment as a major threat to national security and economic competitiveness are now actively reaching out to them.