NEW YORK ( TheStreet) - Wednesday's European Union Summit is the market's main focus. The key issue is whether European officials can finally provide closure to the two-year-old debt crisis and deliver the "comprehensive" and "decisive" package they have repeatedly promised. We are skeptical, as governance structures and diverse interests of the stakeholders foster incrementalism.Outside of the EU Summit there are three political issues that do not seem to be appreciated by many participants. These events can have dramatic implications for the economic and financial outlook.
Press reports suggest that the complicated documentation was not provided until Monday night from Brussels and it was in English. Today will be spent discussing it, but the point here is that the political risk in Germany has risen.
In any event, the fact of the matter is that Berlusconi has barely survived a number of confidence votes. Many expect the economy to slip back into recession (slip is the right word as growth has not been very strong at 0.1% in the first quarter and 0.3% in Q2). The fragility of the Italian government is a threat to stability not just in Italy but in the eurozone as a whole.