The European Union is an existential crisis because its crowning achievement, the single currency, has come under assault from all sides. The continued existence of the Euro has even been called into question as country after country within the euro zone has been forced into bailouts and austerity. The heart of the problem is, as elsewhere in the industrialized world, stems from the unseemly growth in private credit that preceded the financial crisis in 2008 and the private debt overhang that accompanied that credit growth, even in the aftermath of extensive asset price deflation. Put simply, many private sector households and businesses across the industrialized world are upside down, in negative equity, bust by common definitions of balance sheet solvency. And the result has been and continues to be crisis.
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The political economy of the euro crisis, part 1 originally appeared on Credit Writedowns