Europe is back in focus this week as Greece moves closer to defaulting on its debt. Germany’s Angela Merkel, meanwhile, has been campaigning that aid to their wayward EU partner is not assured (no doubt in a bid to exact stricter conditions tided to that aid). Greek stocks have plunged to new lows and yield on its sovereign bonds have soared. Still, wanting to placate angry voters at home, chances are the current Greek government won’t go far enough with the needed spending cuts, which will likely result in a default on Greek bonds. But the tragedy doesn’t stop there.

 

Fears that Greece’s woes will hit others, such as Portugal, Spain and Ireland, has sent those shares down sharply as well. Analysts at Goldman Sachs estimate the region will need more than $200 billion to avoid a debt default—triple the sum currently being bandied about. At some point Germany, France and the other stronger members of the union will most likely say “enough is enough” and sever their ties to the Greeks and other nations that don’t tow the line on spending in favor of a smaller, more fiscally conservative monetary union.

 

The US dollar is up on the EU’s troubles, but stocks here are feeling the pinch on the possibility that Europe’s recovery will be delayed, hurting the earnings prospects for US companies.