Why Can’t Europe Avoid Another Crisis? Why Can’t the U.S.? from The Baseline Scenario by Simon Johnson

Why Can’t Europe Avoid Another Crisis? Why Can’t the U.S.?

from The Baseline Scenario by Simon Johnson

By Simon Johnson
Most experienced watchers of the eurozone are expecting another serious crisis to break out in early 2011.  This projected crisis is tied to the rollover funding needs of weaker eurozone governments, i.e., debts falling due in March through May, and therefore seems much more predictable than what happened to Greece or Ireland in 2010.  The investment bankers who fell over themselves to lend to these countries on the way up, now lead the way in talking up the prospects for a serious crisis.
This crisis is not more preventable for being predictable because its resolution will involve politically costly steps – which, given how Europe works, can only be taken under duress.  And don’t smile as you read this, because this same logic points directly to a deep and morally disturbing crisis heading directly at the United States.