Wall Street Journal
January 3, 2012
Bouts of panic. Moments of elation. Vertiginous plunges. Markets lurching on the scantiest fragment of news from a Parliamentary committee in a minor-league country.
That was investing in Europe in 2011. Be prepared in 2012 for at least more of the same.
The rocky road was thanks to weakening economic performance across the continent and, most of all, to the euro-zone debt crisis.
The economic story is almost certain to be worse. Europe saw modest growth in the first quarter of 2011, and then the slowdown began. Most economists now project recession in 2012.
As for the debt crisis, it is far from over. At the end of 2011, European leaders all but gave up their bid to build a giant bailout fund—they just don't have enough cash—and instead scrambled to assemble the underpinnings of a tighter fiscal union, in the hope of giving a reluctant European Central Bank confidence to step in and offer support for government-bond markets.
But Europe has only touched its toe on the fiscal-union path, the faraway end of which is common debt issuance for the 17-nation bloc. A lot could go wrong before it gets there.
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