EU crisis?

According to the Wall Street Journal this morning the European Union governments are meeting privately.  The subject?  Increasing the size of the Eurozone’s bailout fund.

The reason is that both Portugal and Spain have made it onto the radar screens of investors.  Naturally, these investors are concerned that both governments may default on their debt or that they have burgeoning solvency issues.  Is this a crisis?

Perhaps my understanding of the word crisis is not in step with the modern understanding of the word.  But I think of crisis as something that is about to happen, or has already happened, that was unexpected and has caused a lot of damage or has the potential to cause a lot of damage.  Inherent in my understanding is the word ‘unexpected.’

For example, I wrote about the potential for the Great Recession to be more damaging in the EU than in the United States back in early 2009 – a full year before it happened.  So when investors began to unravel when the Greek financial crisis unfolded, I was certainly surprised.  The data were out there for any old reader to turn into actionable information.  One of the problems that was obvious in the lead up to the “moment of truth” in the real Greek tragedy, was the fact that the EU charter had no mechanism in place to deal with such a situation.  So there was a problem, Greece, without an apparent way to solve the problem.  That was a crisis.

What is not a crisis is the state of the EU as I write this post.  The potential problems now have the scrutiny of both European governments and of investors.  So nix the unexpected component of any generic crisis.  Not only that, but should a ‘crisis’ unfold – the unexpected default of a European nation – there is no a known and significant response mechanism built into place, the European Financial Stability Facility.  Blow two to a ‘crisis.’

That the EU is anticipating problems ahead of time is something that is very important.  In my 2011 Predictions post, https://jasonapollovoss.com/web2010/12/13/what-my-intuition-tells-me-now-2011-predictions/, I stated the following:

“Europe – The debt storm that is passing through Europe right now (Portugal, Ireland, Italy, Greece and Spain) will subside with not much consequence in terms of the economy.”

What I was looking at was the same data everybody else was looking at.  But critically my intuition let me know that Germany’s back stopping and underwriting any future problems was the end of the ‘crisis.’  Investors just needed to know someone understood, was taking responsibility for the situation, and that they had the power to do something about it.  Everything else after that is details.

So I am sticking to my prediction quoted above: the debt ‘crisis’ in Europe is going to blow over without much of an economic result.

Jason