A major world economy faces a fiscal cliff. Piecemeal efforts at ameliorating the crisis exacerbate the economic uncertainty, which deepens the decline. Increasing calls for a "grand bargain" to address the systemic nature of the problem are met with partisan paralysis. Stock markets, not confident that rigid ideologies will eventually yield to reasoned compromise, tank.
Europe? Well, sure. But the same scenario could also play out in the United States.
For now, the crisis is worse across the Atlantic. A week ago Spain was granted a $125 billion banking bailout.
Spain's woes have sparked concerns that Italy may need a similar bailout or, worse, that either or both governments will need to be rescued. On Sunday, Greek voters will hold a national vote that may determine that country's political and fiscal future.
The outlines of a possible eurozone grand bargain are relatively clear: a version of the Federal Deposit Insurance Corp. system, and an even closer political, fiscal and monetary alignment.
But that would mean that Brussels could have more say on a nation's budget than leaders of those countries. Not surprisingly, there aren't many citizens who will willingly cede sovereignty, even if their elected leaders will.
Greeks aren't the only Europeans pushing back against austerity measures imposed from the outside. That's why the biggest gainer in Greece's previous election was a leftist, anti-austerity party. And for their part, German voters aren't likely to reflexively re-elect leaders who keep bailing out their Southern European neighbors.
The United States has more flexibility than eurozone countries because it controls its own currency and has the capacity to borrow at near-record low levels. And despite all of our fiscal challenges, many global investors still look at America as a relatively safe haven.
