The big fear in Europe now* is that Greece will leave the euro zone at the same time that Spain’s banking system has a meltdown. The European bailout fund of about $1 trillion couldn’t handle both these events.
The big fear at the White House has to be that the great unraveling in Europe, which seems inevitable and will cause our financial markets to panic at least short-term, will happen so close to the election that Americans freak out and Mitt wins before our markets settle down.
The European death spiral and our election seem to be on a collision course. Obama needs it either to happen soon or wait till after November 6. We know it won’t happen in August because they’re all on vacation.
Merkel would much rather have a President Romney to share her gospel of austerity. I’m guessing she will do what she can to help him, just as the Iranians helped Reagan get elected back during the hostage crisis.
*See “Europe’s Worst Fear: Spain and Greece Spiral Down Together,” Landon Thomas, Jr., NYT