The former chair of President Obama's Council of Economic Advisors, Professor Christina Romer of U.S. Berkeley, says that Europe's leaders are still several steps behind the crisis that has developed around them.
And if the crisis is not addressed soon, Romer says, it will clobber the U.S. as well.
With the crisis now spreading beyond Greece to core countries like Italy, Europe's leaders need to act now, before it's too late.
Specifically, they need to write down Greece's debts and then take bold action to ensure that the crisis stops spreading to other countries.
Romer did not say specifically what this "bold action" would entail, but it would presumably involve the European Central Bank intervening to buy as much debt of countries like Italy, Portugal, and Spain as it takes to keep interest rates at a sustainable level.
Most observers agree that, for Italy, which has the fourth-largest debts in the world, rates need to stay below 7%, which they recently exceeded.
Above 7%, Italy's cost of servicing its debt will rise beyond the total of real economic growth plus inflation, which would put the country on an unsustainable path.
Of course, artificially keeping Italy's interest rates down will not solve the long-term problems in either Italy or the Euro-zone. Doing that will involve either a break-up of the Euro-zone into multiple currencies again... or an even deeper integration, in which Europe's richer countries agree to cover the debts and deficits of poorer ones.
Neither solution is politically popular. So the one thing that seems certain is that Europe's leaders will postpone real action as long as they can.
- Council of Economic Advisors