1. Something causes PASOK to lose sufficient defectors to lose a critical vote.
2. A new election is called with the opposition promising default. This turns into a self-fulfilling prophecy.
3. Contagion spreads to others. Because the problem is fundamentally political, it is outside the control of the Fed, the ECB or Angela Merkel. Another Lehman-style event.
4. Governments around the world are too weak to respond with another round of stimulus.
5. Paul Krugman is right; a bright sunshine like that of Edwardian England ends; the dark, troubled future of the world begins.
That's true and the only way to fix the problem is with good old fashion tax cuts and free trade.
