Deirdre McMurdy

Way back in 1995, when Prime Minister Jean Chretien publicly railed against the "25-year old guys in red suspenders" who were causing grief to Canada's currency, he echoed a very common conviction: that globalized capital markets were both complicating and compromising national control over policy — and politics.

That sentiment resonated with jittery leaders around the world.

Specifically, Mr. Chretien was referring to the fact that foreign exchange traders were exerting extreme downward pressure on the value of the Canadian dollar at a time when the country was in the throes of a deficit crisis.

Seventeen years later, not that much has changed.

The bond vigilantes that deal in national debt still cruise the globe for opportunity, and still lay a beating on those who don't get their house in order. (While Mr. Chretien grumbled about their influence, the pressure spurred Canada to get its house in order.)

Still, as recent elections in Europe have demonstrated, when global markets meet local politics, it's unwise to assume that market forces - and their term sheets - will necessarily prevail.

In France, Greece — and local Italian elections — voter backlash against continued austerity has been the order of the day.

Citizens resoundingly challenged the incumbent leaders who advocated ongoing fiscal restraint, despite the fact that the euro has subsequently — and predictably — been battered and the economic future of Europe is now, if possible, even more fragile than it was before the elections.

There's also a strong possibility that the same dynamic will play out in upcoming German regional elections — which would mean German Chancellor Angela Merkel's ability to play the role of austerity enforcer in the European Union would be diminished.

Then there is the Irish referendum in which the government is seeking the electorate's approval for the new European Fiscal Compact.

So, what next? And what might this mean for North America and, yes, Canada?

The growing political disarray and division in Europe definitely slows the decision-making process at a time of stubborn economic recession. Given how entwined European nations are because of their shared currency, it's a problem.

If the European Union stumbles into another prolonged phase of economic crisis — which is perfectly possible — it will have a direct bearing on North American and Asian economies.

Europe remains, after all, a significant chunk of the world economy.

Certainly, international financial markets have fully — and predictably — reflected these concerns already. The euro currency took an immediate dive after the Greek election (the political outcome in France seemed to be partially factored in already) and stock markets around the world descended into a tizzy.

This time around, however, the stakes are particularly high. In a U.S. presidential election year, if economic turmoil spreads, it could have a negative impact on long-term economic recovery.

Europe's economic woes also have political consequences.