European stock indexes just endured one of the worst trading sessions of the year. The Ibex dropped 4.6%. Macroeconomic data smack of recession and fear deflated the markets. The United States opened the morning with higher unemployment claims and emerging economies also took a huge hit due to decelerating growth worldwide.
This difficult situation could become extraordinarily tense if there is no progress in the sovereign debt crisis, which is concentrated in Greece. All signals indicate that markets will remain volatile until September 29, when the Bundestag (German parliament) will state their opinion on future amplification and adjustment to the application of the recovery fund.
If uncertainty persists, the sovereign debt issues will become aggravated, which combined with murky growth forecasts, will lead to even more shaky trading sessions ahead. The IMF is warning that the current financial crisis could be worse than the once experienced in 2008. If that were to happen, we would be forced to confront reality and make decisions according to the seriousness of the situation, coordinated by the G-20 summit. Reforms would be urgent, profound and real. Ireland is currently a paradigm of how this proscription works.
The United States is one of several bailed-out countries, but they are spinning their wheels. Worse off, Greece is sinking without a raft for not carrying out disciplined reform or effective budgeting. For their part, Ireland is growing at 2.3%, its strongest rate since 2007. The Irish story provides a deserving lesson for the rest of the continent: sacrifice and stable reform.
