The real worry over Europe...

What's the most important thing to worry about in Europe - or with the economic crisis more generally? I think for many people -- especially economists of the Chicago school -- the biggest concern is that we might lose a couple of percentage points of cherished growth over the next ten years, leading to a tragic loss of GDP relative to where we might have been. But the really important thing about this crisis isn't about money or wealth, but about social stability. George Soros, as usual, sees more clearly than others:

I have been very concerned about Europe. The euro is in the process of destroying the European Union. To some extent, this has already happened, in the sense that the EU was meant to be a voluntary association of equal states. The crisis has turned it into something that is radically different: a relationship between creditors and debtors. And, in a financial crisis, the creditors are in charge. It is no longer a relationship between equals. The fate of Italy, for example, is no longer determined by Italian politics – which is in a crisis of its own, I would say – but rather by the creditor/debtor relationship. That is really what dictates policies.

The point is that this European crisis is NOT JUST a financial crisis. It is much more serious than that. It's a political and social crisis. We talk about it in financial terms, but the really important thing is a massive breakdown in cooperation and political function, obviously in Europe, but elsewhere as well. A few years ago, the idea of a global financial crisis seemed pretty hard to imagine. What are we failing to imagine now?

Soros also has a few thoughts on austerity:

The evidence is growing that austerity is not working. Sooner or later, I expect a reversal of the current fiscal policy – the sooner, the better. There is a political problem, namely that the creditors dictate economic policy. And there is a financial or an economic problem, namely that the policy the creditors advocate is counter-productive. The rest of the world, in the face of excessive unemployment, is no longer trying to reduce prematurely government debt accumulated during the financial crisis. And the rest of the world engages in quantitative easing. The latest convert is Japan, where the central bank has been forced to abandon its orthodox monetary policy. So I think it is only a matter of time. Something has to give in Europe, because Europe is out of touch, out of synch, with the rest of the world.