Europe on edge

By chance, or perhaps not, two events in Europe are unfolding with unusual speed: the potential of a new financial panic and deepening recession and the sudden scramble to decide what course Britain will take given that no party won a clear majority in their May 6 elections for parliament.

Our domestic papers haven’t been much help in figuring out these parallel dramas, but the continental fusses could affect us deeply. Greece’s sovereign debt problems threaten to spill over throughout Europe and create a new run on the too-big-to-fail megabanks, all of which are incestuously intertwined. There is already talk of a disastrous refreeze of global credit markets, which could toss us right back into the recession we thought we were escaping.

The banking regulation that now hobbles through Congress has been beaten and bloodied about the head and shoulders by the blunt instruments of the ever-bloated banker lobby—an amazing display of its continued sway over (or shall we say ‘purchase of’?) Capital Hill despite having just wrecked the country. But a new episode of finance-induced economic collapse could change the gameboard. The just-defeated Brown-Kaufman bill to mandate the shrinkage of all banks to a mere $100 billion in size might look less radical if we get Round II of the bursting bubble less than two years after Round I.

The European Union’s central bank poobahs are meeting Sunday to try to come up with some convincing move to stave off the viral spread of a new banking panic, and we’ll see if they pull it off. However, unlike the dictatorial and secretive powers awarded our Fed chairman, the ECB board has to navigate through a coalition of opinionated and jealous states where everyone has a veto. Such conditions would complicate to death a PTA bake sale.

Thursday’s mysterious and still unexplained 600-point drop of the Dow in fifteen minutes is a sign that all is not well. Large amounts of money swirl about seeking safe harbor.

Meanwhile, the British populace has pronounced itself at the polls. Unfortunately, no one can quite agree on what it said there. Their weird voting system (we should talk, but anyway. . .) produced a three-way split with no majority and the balance of power residing with the guy who came in last. Any conceivable solution can be said to have two-thirds of the country theoretially against it: a minority Tory government? Exhausted, unpopular Labour back for a fourth term, perhaps minus Gordon Brown? Nothing makes sense, and the sudden headlessness compounds the aura of uncertainty.

Perhaps it is a coincidence that these two things are occurring over the same weekend. But one can hardly escape the double impression of a pair of rickety carriages careening madly downhill with various drivers fighting over the reins.