The debt markets could get dicey again in a few weeks or months as the political situation in Europe continues to have greater dysfunction and turmoil with new elections. As the needed austerity programs take hold, the unions and others are up in arms over having to live within the means of their countries for the first time in a generation. The labor laws in much of Europe have been structured such that it is essentially to fire anyone and if there is a layoff, the redundancy pay is prohibitive. As a result the cost to produce in much of Europe is higher than most of the world and inefficiency prevails. In Italy most companies stay small because the economics of growing just do not work. Between the labor laws and the bureaucracy, and the massive corruption brought about by the restrictive laws, it is not worth building a sizable business. In Greece it is similar and almost impossible to start a new company. In Spain as in Italy and Greece and elsewhere, there is little change in a workers lifestyle to be employed or unemployed. You get a wage or you get social welfare of similar amounts in many cases. I had a Spanish doctor tell me over a year ago, that 20% unemployment was not really a problem because workers get unemployment, full healthcare and other benefits. She told how you would never know there was widespread unemployment if you saw how crowed the restaurants are. That is the policies that got Spain into the mess it is in.

It is highly likely that Hollande will win in France and try to undo the debt agreements just put in place. He intends to raise the minimum wage and to materially ramp up public sector hiring. The exact opposite of what is required to save France form becoming Spain. The Dutch government fell. It was one of the few strong economies. The Italian unions are starting to push back against labor law changes. The UK is in recession and pressure will mount against Cameron. Greece is never going to achieve it targets for debt reduction and labor law changes sufficient to really solve its problems. Ireland is trying, but it is unclear if they will succeed especially if the UK goes into a deeper recession. While Draghi and the other technocrats are working hard to fix the mess, the politics are slowly going to overwhelm the needed reforms. Europe is at a major crossroads in its economic policies and future, and while Germany has been able to push everyone to make needed reforms, the unions and austerity is making the politics too hard to succeed long term. The entire social and political compact that has been in place for two generations is now being ripped apart, and that is not something that happens without major political and social disruption.

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