Another stressful week for policymakers. In Athens, Greece, 100,000 citizens marched and rioted to protest against harsh austerity measures needed to resolve their financial crisis. The Eurozone community is once again concerned about the stability of Portugal, Ireland, Italy and Spain. The International Monetary Fund’s director of monetary and capital markets José Viñals, said “we are entering a new phase of the crisis – I would call it the political phase of the crisis – and now time is of the essence to take the political decisions that are needed to avoid problems down the road,” and “sovereign risk is an issue in Europe, it’s an issue in the United States.” California’s Governor Jerry Brown vetoed the state’s budget (the first by a governor since at least 1901) because it did not address the state’s budget challenges – the state’s controller could be issuing IOUs within two weeks.
MY TAKE: Against this backdrop, an increasing number of business leaders, politicians and policymakers are becoming more cautious. While the scale of these challenges is significant, it is likely the lack of a shared vision on how to move forward that will perpetuate an environment of conflict and uncertainty.