Robert Kuttner: Can Europe Be Spared Cascading Collapse?

The failure of the European authorities to arrest the speculative run on Greek bonds and the sense of inevitable wider collapse reminds me of the diplomatic failures that led to World War I.

In the summer of 1914, myopic bluffing by Europe's key leaders produced a catastrophe that nobody wanted. It began in Serbia, a small nationalistic province of a decaying Austro-Hungarian empire, but the conflagration soon spread to all of Europe like a chain of firecrackers. No leader was farsighted enough to grasp the wider common stakes and head off disaster. Each pursued only narrow self-interest.

The impending economic collapse of Europe is looking like one of those avoidable calamities in slow motion.

Here are the elements of the Greek crisis, its wider ripple effects, the diplomatic paralysis, and the solution that seems beyond the grasp of European politics.

Greece, a small nation of just over 11 million people, has a government debt that it cannot service without external aid. Speculators expecting a default have been making bets that Greece will fail to pay, raising its interest costs and thus increasing the likelihood of the default they are betting on.

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