In the same way, flawed as President Barack Obama's stimulus package a few months later may have been, it too is likely to look wise next to the eurozone's approach, especially if, as seems likely, the eurodithering both produces long-term social pain and triggers instability or a resurgence of Europe's intolerant, nationalist right.
Another event I participated in last week, a conference featuring several dozen major institutional investors, offered a slightly different take on the drama in the eurozone. To be sure, there was a universal sense that Europe's leaders and the international community at large were foolishly playing with fire in their mishandling of the crisis. As one participant in the conference said, "There is an old rule of debt crises. If the debt can't be paid, it won't be." What he, a longtime research director for large investment funds, meant was that overly indebted countries needed to default, devalue their debt through inflation, or negotiate a deal that lowers or postpones their obligations. Debt crises invariably involve haircuts for someone.
There was also a widely held sense among the investors that the crisis might blow up in a way that would produce cascading bank failures and also, as a secondary but significant consequence, would undo Obama's reelection prospects. But they too saw the crisis as one of choice. The relative ease with which one of the several Eurobond proposals might be implemented was discussed and made clear, and therefore many in the group believed that after the muddling, perhaps in the face of the imminent possibility of bank collapses, European leaders might finally listen to reason.
This sentiment led a number of the investors at the event to conclude that they may be underweighted on the upside when it comes to Europe. The thought was that if catastrophe were indeed going to be averted, then some assets, like big blue-chip German and other Northern European equities, might be undervalued. It might also be worth holding stock options to buy them should a more positive scenario play out.
In other words, while the majority of investors were, like the majority of senior officials I spoke to this weekend, very worried about Europe's current trajectory, they still believed there remained a possibility that in the end, self-interest and rationality might force Europe's leaders to do what thus far they have been unable or unwilling to do: live up to their responsibilities and serve the interests of their people. But that, of course, is far from a safe bet.
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