The main themes that we've watched play out recently on the Greek stage will be discussed on a bigger stage this week as finance ministers from 20 of the world's largest economies -- the G-20 -- meet in Mexico.
The G-20 leaders are expected to push Europe for stronger action to stymie the risk of contagion. But exactly how to do that -- through more austerity to stop the bleeding or through more spending to encourage growth -- remains a point of contention.
The Greek election on Sunday put at bay the most immediate concerns that Greece would be exiting the euro, dropping the bailout plans in an effort to go it alone. The euro zone as everyone knows it survived another day, but the Greek government is now tasked with the same tasks it failed to complete -- including the very first step, forming a coalition government -- just weeks ago.
Current System Isn't Working
Although the so-called "pro-bailout" group, the New Democracy Party, won the most Parliamentary seats of any party in the Greek election, staving off euro-exit fears for now, even supporters seem to agree the current system of bailouts contingent on cutbacks doesn't seem to be working. And the constant fear of contagion and/or an outright implosion of the euro zone has tripped world markets, and weighed on rich and developing nations both.
"Advanced economies are struggling with crushing debt loads or political stalemates, while emerging economies are slowing in part because of trouble in Europe," as the WSJ's Sudeep Reddy puts it.
For the G-20 leaders, disagreement about the appropriate course presents a sizable roadblock to further coordinated action. Thus, there are no real expectations for anything but conversation and tone-setting for the gathering. In the meantime, the global recovery is threatening to stall; some argue it has already.
A Slowing Recovery
In the U.S., employment growth has substantially slowed and even GDP is showing an economy that's more lethargic. Next week the U.S. government is expected to report the third official estimate of first quarter GDP. The economy is expected to have grown at an annualized rate of 1.9% in the quarter. The estimate was lowered in a second take on May 31 from the initial 2.2% estimate. And it marks a slowdown from annualized growth of 3% in the fourth quarter of 2012.
As seems to be the case everywhere, the question is how much should the government spend -- and what muscles can it flex without spending -- to encourage growth.
Slow growth has brought about another round of calls for the Fed to dig back into its toolkit to rev things up. The Federal Reserve's policy-making arm meets Tuesday and Wednesday to discuss just that. There is speculation that the Fed is most likely to extend its so-called Operation Twist, which swaps billions in short-term bonds for ones with a longer duration to push down long-term interest rates, and make it cheaper for businesses to get loans and consumers to get mortgages and other forms of credit.
The problem, as CNNMoney notes, is that even with record low interest rates, small businesses and prospective homeowners have had problems getting loans due to heightened lending standards. Still, the extension of Operation Twist is more likely than another round of quantitative easing, or QE3.