As the rest of the world watches, wondering how much the chaos in Europe will affect the global economy, stock traders in New York are suddenly paying attention to public opinion in Estonia and provincial elections in Germany. The reason is that a viable solution to the debt woes in Europe involves more than just a back-room deal among creditors and finance officials. It also means rallying public support for controversial moves such as budget cuts within one's home country and bailouts for other nations.
On Sept. 29, for example, a planned enlargement of a key rescue fund, the European Financial Stability Facility (EFSF), passed a key hurdle as Germany's Bundestag lent its support to the plan. But bailout efforts, giving Greece and other nations a lifeline to remain in the eurozone, are unpopular with most German voters. Even while Chancellor Angela Merkel won this vote, the parliament decided to reserve veto rights over any future bailout expansions.
At the same time, the costs of a disintegrating eurozone could be large. European workers and consumers have benefited from the currency union, economists say, and a breakup would be messy. The departure of even one nation, raising fears that more would eventually follow, would affect credit conditions across the Continent.
So far, by the way, the euro currency itself hasn't imploded as a result of the debt crisis. The euro is down a bit from its historic peak. But it remains a potential rival to the US dollar as a desired "reserve currency" for other nations and central banks around the world.