The following two quotes, like bookends, summarizes the issues that Europe faces in the months and years ahead, and why I consider Europe to be overrated for political stability. This false sense of security will show up in the future if this turns out the way I expect it does.  The Euro is extremely overvalued, when political risk is included in the equation.

“A premature Greek default would change everything. As would the failure by the EU and Portugal to agree a rescue package in time; or an escalation in the EU’s dispute with Ireland over corporate taxes; or a ratification failure of the ESM in the German, Finnish or Dutch parliaments; or a German veto for a top-up loan for Greece in 2012; or the refusal by the Greek parliament to accept the new austerity measures; or a realisation that the Spanish cajas are in much worse shape than recognised, and that Spain cannot raise sufficient capital.” (FT) Wolfgang Münchau

The second quote is from the Executive Committee of the Euro Central Bank.  Which is arguably the most undercapitalized major central bank in the world.  It does not have the tools, or the capital, or the balance sheet to handle anything else being thrown at it.

“There is ‘no painless way’ for countries that sought aid to reduce debt, while a restructuring may cut off the respective country from the financial markets for an unforeseeable time, Stark was quoted as saying. The only viable path for such countries is to ‘strictly push through reform programs and repay debt in full,’ the central banker was quoted as saying. Stark did not refer to a specific country.” (Bloomberg) Jurgen Stark (ECB)