Right now, in my opinion, there is really only one issue in the world: the European debt crisis.

I realize that the U.S. has a huge deficit and debt problem, but those issues probably do not come to a head for another few years. India and China are slowing down. However, even that can come back to European problems. Euro banks own a lot of Indian equities, and as they run into liquidity problems they are forced to sell these positions and redeem rupees, which has played a major role in the decline in the value of the rupee.

Investors are just unlikely to take huge risks as long as worries over Europe exists. We must remember that it is really not so much a debt crisis in Europe as a banking crisis and crisis of confidence. Spanish banks own 50 percent of Spanish debt, so when rates climb and the value of bonds fall, it hurts the banks' balance sheets.

Editor's Note: Get David Skarica's Gold Stock Adviser — Click Here Now! Europe needs concrete solutions. I see them as:

1. Greece needs to exit, or the Grexit as it is known. Greece’s debt situation is far worse then the rest of the PIGS. Its debt-to-GDP is 161 percent, its economy is contracting 6 percent this year, its credit default spread is 12,000 basis points, and the yield on 10-year bonds is 27 percent. As opposed to 580 basis points and 6.25 percent for Italy. Therefore, Greece is unfixable; Greece's exit will allow the rest of Europe to deal with solvable problems.

2. Once Greece exits, Europe can concentrate on Italy and Spain, which are much larger and fixable. Some sort of euro bonds can be developed that will allow Spain and Italy to borrow at 1-3 percent rather than 5 to 7 percent. This will allow more time for structural changes to their economies and budget cuts. You cannot have euro bonds while Greece is in the euro because lending them money is a waste of time; their situation has gone too far.

3. Germans do not want to bail out Italy and Spain, but they must see the benefit of the euro. Germany runs huge trade surpluses with the rest of Europe. As George Soros recently said, Germany does not want to be the center of a European empire they control and be hated by all those around them. Therefore, Germany must see the benefits of the euro to them in terms of selling goods to other euro nations and realize there is a price to pay for this. That price is euro bonds.

4. A common fiscal and banking regulation union needs to be established. You can’t have someone in Spain retiring at 50 with 70 percent of his wages and someone in Germany retiring at 65 with 40 percent. It doesn’t make sense.

Editor's Note: Get David Skarica's Gold Stock Adviser — Click Here Now! I can not see a real rally in equities until Europe has some concrete solutions to its problems. However, the good news is that I foresee a Grexit within the next year. I feel that this exit will force the hands of Europeans and then allow them to be more open to euro bonds and begin to really reform their economies. When this happens we can see a rally in European markets that will spread to markets all over the world.

About the Author: David Skarica David Skarica is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He also writes the Gold Stock Adviser. Discover more by Clicking Here Now.