We have all heard the range of opinions on the effects of the sovereign debt crisis in the European Union. Greece has gotten the most press as their crushing debt load and rapidly declining economy has their citizens up in arms. We have all seen the footage of peaceful protests on the Greek Parliament building turning suddenly violent and scary. Portugal and Ireland are the next worse off in terms of their balance sheets. Both have large overall debt loads and large current deficits that need to be addressed. The most recent fear is that of Italy and Spain who have each much larger economies and therefore pose a drastically greater threat to the global financial system.
The question then is how does this whole situation get resolved? To answer that question we look a little deeper into the situation and ask further questions. Who are making these decisions? What are their primary interests? Who are their constituents and what do they feel about it? All in all its a messy situation but one that I think has a logical outcome. One that is not nearly as scary as some people might think. […]