The situation in Egypt has been slowly building over the last few weeks as the deadline for elections approached. It has finally erupted in violence, interestingly over the issue of whether the protesters could set up permanent protest camps in Tahrir Square. The substantive issues revolve around the process by which the new constitution will be written and the perception that the military was taking a role that was considered too intrusive. I suspect that these protests will go on for some time–the protesters have far too much invested in the revolution to see it sidetracked now.
We will get a good read on the direction of the Spanish economy after the elections there on Sunday. The Popular Party, a right wing party, has promised both tough austerity measures plus a reduction in unemployment. I am not sure how that can happen, at least not in the short or medium term. But we’ll see how the bond markets react on Monday to the election.
The United States will play an important role in the unfolding economic situation in Europe this week. A budget agreement is supposed to emerge from the discussions of the so-called “supercommittee” that was charged to come up with about $1.2 trillion in budget debt reductions by 23 November. Right now it seems unlikely that this will happen. We’ll see whether the markets interpret the lack of an agreement as evidence of continued dysfunction with the American government. Such an interpretation will likely trigger off great anxiety within global markets.
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