I have to admit that I didn't see this Euro crisis coming. While I've long been a principled pessimist on the American economy and, frankly, the entire Pax America--and that has largely come to pass over the last ten years--I did not see the weakness in the Eurozone and its currency until the crisis hit several months ago. In fact, I often thought of Europe as the way to do things right economically, as opposed to our own economy, with its declining middle class, growing wealth inequality, manufacturing outsourcing, debt-driven bubbles, and lack of appropriate financial regulation.
There appears to have been a fatal flaw in the concept of the Euro from the start. As a common currency between sovereign states that do not have a true political or fiscal union, the Euro--born around 2000--was a temporary boon to business and the economy. During the last decade, the Euro inexorably gained in strength against the American dollar, and it therefore began to appear to be a rival to the dollar, in terms of being a global reserve currency (which is a little understood, but very important, concept).
Yet it turns out that a lot of the feverish economic activity in the European Union was a result primarily of cheap loans from irresponsible European bankers who clearly didn't check out the financial viability of the countries to whom they were loaning money, becaue they thought they were all backstopped and guaranteed by the European Union.
Greece is a case in point. Barely a modern economy at all, the Greeks were able to borrow billions of dollars from European bankers to subsidize a lavish lifestyle (pretty much what happened in America as well), that included high public salaries, early retirement, and nice pensions (again, that sounds like most state and cities in America). Now Greece is basically in default, and it's threatening to tear the financial affairs of Europe apart.
Everyone seems to be looking to the one strong and fiscally responsible country in Europe, Germany, to save everyone else. But who can blame the Germans for not wanting to do that and subsidize other's profligacy? (For an enjoyable analysis of this by writer Michael Lewis, look here.)
So the unenviable options for Europe are: on the one hand, move toward a much more centralized political and economic union, or on the other hand, get rid of the Euro, go back to dozens of local currencies, and risk spinning apart, with all of the attendant risks. They seem paralyzed at the moment, and I can sympathize with their dilemma.
What does all of this mean for the USA? Well, the Euro will no longer be a rival currency, that's for sure, so that's a short term gain for us. But there is also a contagion in this economic turmoil, since their banks and our banks are closely connected. And that is not good. We have our own severe economic problems, and problems in the Eurozone will probably only exacerbate our own.