Last week’s post suggested avoiding optimism about the G20’s statement that on Oct. 23 the European Union (EU) will "decisively address the current challenges through a comprehensive plan”. Recent comments suggest that the situation is worsening and the Oct. 23 deadline has evolved into a multiday planning session. An unnamed European official, cited by the Financial Times, said; “We’ve lost the main parachute and we’re on the reserve chute and we’re not sure that will even work.” German Chancellor Angela Merkel said they are working with “a technically complex process” but expects a breakthrough on Oct. 26.
MY TAKE: Europe and the global economy confront a broad set of complex and multidimensional problems. While some investors believe that Europe will “muddle along”, the probability of unexpected consequences from near term policy actions, or perhaps inaction, seem to have increased the market risks. With Eurozone leaders poorly managing the Eurozone crisis for about two years, a “wait and see” approach to this week’s events seems prudent.