Austerity measures in Europe have been the topic of a heated and mostly confused debate in the economic world. During the May summit of the leading industrial nations at Camp David, German chancellor Angela Merkel and other European leaders pushed for continued European austerity. Keynesian critics argue that these policies destroy economic growth.

Hope springs eternal among policy makers in Europe’s beleaguered periphery. At five minutes to midnight in Athens, and with a bank run having started in Madrid, these policy makers cling to the forlorn hope that somehow Germany is going to relent on its strong opposition to euro bonds.

Sunday’s elections results in six European countries, particularly France, Greece and Germany, bode poorly for satisfactorily resolving the European Union’s ongoing financial and political crisis.

Attempts at austerity and deleveraging in Europe have converted an economic problem into a political dilemma, with leftist governments rising against Germany's austerity-laced rescue packages. Germany now faces a tough economic decision that will involve choosing between a breakup of the current euro system and a movement toward a common fiscal policy in Europe.

Center-right leader Angela Merkel is missing an opportunity. She should take a cue from her left-of-center predecessor, Gerhard Schroeder, particularly on labor market reforms.

One year after the Fukushima disaster, nuclear energy policy is moving in two opposite directions. While much of the world, led by Germany, is embracing caution and winding down nuclear energy ambitions, the US, Britain, France and Russia are poised to boost their nuclear estate.

In 2008 Barack Obama was propelled into office largely by a financial crisis. The main difference between then and now will be that this crisis did not originate in the US, but in Europe. And it will be one over which President Obama has no control.

What's needed is the strong arm of the European Central Bank to remove catastrophic risk from the marketplace without risking the bank's core mission of fighting inflation.