TRAVELLING in Europe this week before the International Monetary Fund (IMF) annual meetings in Washington DC, there was an air of worsening crisis. A series of bad news fed the fear factor. Shortly after the Swiss National Bank intervened in the Swiss franc, a UBS rogue trader was charged with losing 2.3 billion euros in unauthorised trades. Then, Standard & Poor's downgraded Italy. Market volatility was higher than ever.
I asked my friends in Europe on their perspective of the crisis. There are three possible scenarios. The first is the present structure and situation of basically helping Greece prevent a default, but at present, the chances of this scenario being viable without something more drastic are diminishing. The second is a political and fiscal union in which there is a European tax mechanism to tax winners and transfer payments to help losers. The third option is the failure of the euro and therefore the European Union itself. Nouriel Roubini and other doomsters seem to suggest that the third option is the most likely.
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