Iceland's Volcanic Cloud: Europe's Black Swan?
A specter is haunting Europe -- the specter of bankruptcy. Just when we thought that things in the old continent are as bad as it gets, it looks like they are about to get much worse. A few weeks ago, Greece practically defaulted on its debt; Several other European countries, including England, seemed to be heading in the same direction; and global investors were already losing faith in Europe's ability to recover. And now, a highly improbable event is threatening to exacerbate the situation.
An Icelandic volcano erupted on April 15, creating a black cloud that threw Europe's airline industry into chaos: Two thirds of all flights have been canceled over the past weekend, and Europe's largest airline, Lufthansa, cancelled all of its flights. The movement of people and goods in and out of the continent is severely hampered, bringing many industries to a virtual halt. The eruption is far from over, and experts are still unable to predict the end of it. The volcano's last eruption, in 1821, lasted for two years.(!)
There is a bitter-sweet irony in the fact that Iceland, the first European country to go bankrupt during the current financial crisis, is also the source of Europe's latest trouble; a second warning to those who failed to listen to the first one. European governments spent themselves into massive debt and hoped that somehow it will all work out in the end. Looks like they miscalculated the odds. A black cloud is hovering above the old continent, and it's made of much more than volcanic ash.
The bright side is that this singular event might throw Europe's troubles into a sharp relief and convince the locals that the time has come to change their ways. And when I say change I am not talking about Obama posters and empty slogans but about individuals taking responsibility for their own lives, saving what they earn, and investing it wisely. I am talking about governments slashing expenditures, minimizing entitlements, and going through a painful - but therapeutic - period of de-leveraging across the board. After all, a few clouds are a much gentler wake up call than a war or another type mass-casualty event. And so, Europeans can count themselves lucky, but not for much longer.