How could Europe’s May elections touch the U.S. economy?

In their recent round of elections Greek voters largely elected candidates that opposed the terms of the country’s bailout (read: austerity measures). Should Greece back away from the agreement and lose its rescue loans, the nation will go bankrupt and face the possibility of leaving the eurozone. What would this mean for the Greek, European and global economy? Possible chaos. Possible bounce-back. Read David McHugh’s article for a concise summary of the possible outcomes.

Could Europe’s debt problems hurt the U.S. recovery? To some extent, we have already experienced difficulties. For over a year now, financial markets have been burdened by some measure of “concern” over European debt, and this has resulted in random spikes in volatility and fluctuations in the stock and bond markets.

Last week, France’s latest round of elections put a socialist president in office. This new president will advocate for stimulus measures. With German chancellor Angela Merkel squarely in support of austerity as the answer to Europe’s debt crisis, it seems likely that the leaders of the eurozone’s two largest economies will be at odds. That is, France and Germany will have different prescriptions for the solution to the European debt problem. Coupled with the increased probability of Greek exit from the Euro (and corresponding turmoil), global markets will certainly be touched. With the tangled nature of modern financial markets and currencies, it will be important to monitor the European situation as the new governments settle into office.

As pundits try to make sense of what will happen, you are certain to hear worst-case scenarios and best-case scenarios. For now, be patient, and try not to fall into the alarmist trap of the 24 hour news cycle. Although it is still impossible to predict what will happen, I can tell you with certainty that you will hear all about it over and over and over again.