As markets erred to the downside this week, it’s clear that Europe has its back up against the wall. Italian and Spanish bond yields have reached new heights as the contagion appears to be spreading. Not only are all Eurozone nations linked together with debt holdings, but so is the U.S. as well as many Asian countries. Although we didn’t see a huge single day drop in markets in the last several days, there is an uncomfortable amount of risk still lingering.
Political cohesion and smooth governmental transitions are necessary to spearhead economic progress and inspire confidence among investors that European leaders can come to a consensus concerning a bailout strategy. However, getting 17 nations to agree in a timely fashion is a tall order when time is of the essence.
In the meantime, this week’s interview between CNN’s Fareed Zakaria and PIMCO CEO Mohamed El-Erian provides a solid run down of recent Eurozone developments and what to expect going forward: