Two summaries of the apparently imminent unraveling of the European Union:
Krugman’s Venn diagram about what’s happening now in Europe:
Ryan Avent‘s terrific assessment in The Economist:
On the one hand, it’s as clear as ever that the euro zone needs a massive, ambitious policy to avoid a catastrophic financial scenario. And on the other, it seems ever less likely that the euro zone’s leaders can agree on such a policy and muster the domestic political support to ratify and implement it. If Europe simply can’t do what it needs to do, that leaves the euro zone, and the world, facing a very dark economic reality.
. . . It’s just shocking to think about the dangers that loom and consider the extent to which they’re driven by governmental failures. Despite having been in a state of constant crisis for more than a year, the euro zone is far away from a real solution; the politics may be such that no solution is possible without a dramatic, Lehman-like collapse, at which point it may be too late to save the euro zone. Meanwhile, the European Central Bank blundered into policy tightening, seriously worsening the crisis out of a fear of mild and temporary inflation. Leaders elsewhere have hardly done better. America’s fiscal policymaking has steadily deteriorated, and the Congress needlessly sent confidence tumbling over the summer with a battle over the government’s debt ceiling. . . .
It is a damning performance. If the world economy does indeed face a new crisis and a new contraction in the weeks ahead, rich-world citizens will have every reason to question the institutions of global capitalism. If the liberal order begins to falter, even darker times still may lie ahead.
*(I shamelessly lifted the title from a comment on Krugman’s blog.)