The financial crises in arising from the PIIGS (Portugal, Ireland, Italy, Spain) could potentially pose serious problems in Europe. If Greece is allowed to default, there is possibility that Portugal will follow. This will be like a financial crises tsunami with Armageddonic scale impacts. In short, the very basis of modern Europe could be revamped.
With billions of dollar exposure to Greek banks, Germany, France and even the US financial institutions could potentially face tough roads ahead. And these crises could be prolonged because jobless recovery is making it hard to get over the recession. The old way of exporting yourself out of this type of problem is not going to happen because the balance has tilted. Americans are now cautious buyers and the world has cooled off in prosumer and consumer spending spree.
Watch out, if European leaders fail to get this solved in coming days quickly, they could see damages that will linger for years. Right now, the cost of borrowing in Europe in these nations is up and many social services will be cut-off by governments. As Greeks have shown yesterday, they will not accept this belt tightening without a fight. These guys set a bank on fire.
What is happening today could trigger social crises across Europe if Greece is allowed to default. It used to be corporate debt, now, it is sovereign debt that is the disturbing the world.
I am getting worried that these debt crises could weaken the recovery and possibly create a domino effect across European nations. It is not the best of times in Europe right now.
And this is a lesson for the African Union to step back on the single currency plans. It is all about the weakest link.