How Will the Euro Crisis End?

The Peterson Institute recently staged a debate about the European debt crisis between Simon Johnson and Peter Boone in the pessimistic corner and Fred Bergsten and Jacob Funk Kirkegaard for the optimists. You can watch video here.

In a column for Bloomberg I offer my two cents. I think Boone and Johnson are too gloomy about the short to medium term: I doubt that the euro system is going to collapse this time, despite the amazing dithering of the EU's leadership. It's more likely they'll muddle through, because all parties have so much to lose if they fail. But I don't agree with Bergsten and Kirkegaard that the EU will emerge from all this not just intact but stronger than before. I argue that this crisis will weaken not strengthen the EU's institutions. They are sowing the seeds of the next, and bigger, disaster.