Deep thoughts on Europe's financial contagion, by Peter Boone and Simon Johnson

...Unregulated finance, the ideology of unfettered free markets, and state capture by corporate interests are what ended up undermining democracy both in North America and in Europe. All industrialised countries are at risk, but it's the eurozone – with its vulnerable structures – that points most clearly to our potentially unpleasant collective futures.

As a result of the continuing euro crisis, the European Central Bank (ECB) now finds itself buying up the debt of all the weaker eurozone governments, making it the – perhaps unwittingly – feudal boss of Europe. In the coming years, the ECB and the European Union will dictate policy. The policy elite who run these structures – along with their allies in the private sector – are your new overlords.

...there is no question we are seeing a sea change in the post-war system of property, power and prosperity across Western Europe...

The ECB-EU approach will not return countries to reasonable levels of growth – the debt overhang is simply too large. The southern and western periphery of the eurozone cannot grow out of their debts under these arrangements and so will stumble from stabilisation programme to stabilisation programme – as did Latin America in the 1980s. This is bound to lead to hostile politics, social unrest and more economic crises.

...The International Monetary Fund will do just what the EU and ECB asks to keep the charade in place. The old days when all member countries got presents from the eurozone are long gone; now it is all instructions and austere requirements. But enough resources will be provided to keep everything rolling over.

...The messy solution of the EU leaves the world at risk of the type of shocks we observed last week. This particular iteration may blow over, but another will arise when there is backlash in Athens, Dublin, Lisbon, or – heaven forbid – Madrid.

...It is time to look in the mirror and recognize the problem. Several nations in Europe are bordering on insolvency, and it is now pretty clear that we shouldn't just "bandage" over that for a few years with aid packages.

To deal with this insolvency we need to restructure the debts of those nations...

...there is no leadership today in Europe that could take such decisive actions, so Europe will only reform itself dragged kicking through successive crises until the current, and many ensuing, problems are resolved.

The UK and US need to prepare themselves for more storms. The United States will be in the pleasant position as the world's safe haven, but this will only encourage America's profligate politicians to spend more and build more debt.

...At the end of this great tumult, Europe and the UK will have sound fiscal regimes. Debt will be defaulted on or inflated away, and nations will have dramatically cut spending.

...welfare socialism will prove the victim, erased by a political and financial elite gone awry.

Peter Boone and Simon Johnson
Telegraph