Greek Fire, Part 48

Well, if Felix Salmon's analysis of the "Save the euro!" summit is correct, then the Greek Fire is about to pretty much claim the entire continent.

Remember how Wolfgang Münchau said that the Euro zone had to get it right at this summit or it would collapse? Well, the Euro zone has most emphatically not got it right. Take any of the list of prescriptions of the minimum necessary right now — from Münchau, from Larry Summers, from Mohamed El-Erian — and the one thing that jumps out at you, especially in light of the most recent news, is that if you look at anybody’s list, there’s an enormous number of items which has zero chance of actually happening.

Here’s how the FT put it on Wednesday:

It borders on hysterical to say there are but hours to save the euro, but there is a risk that if the crisis is not now tamed the price of a rescue might start to spiral out of politicians’ grasp. The stakes are therefore very high at Friday’s summit. The world cannot afford another half-baked solution.

And yet, inevitably, another half-baked solution is exactly what we got. Which means, I fear, that it is now, officially, too late to save the Eurozone: the collapse of the entire edifice is now not a matter of if but rather of when.

Oh it gets worse from there, but the central tenet of the issue is that the summit yesterday was a complete failure, and not just because the UK said they wanted nothing to do with saving the euro.  There's simply not enough money to bail out any more countries, period.  It's all been blown on the PIIGS (Portugal, Ireland, Italy, Greece, and Spain.)  And Italy has 2 trillion euros in outstanding debts, when these guys are balking at a quarter of that for the entire permanent stability bailout fund.

But Felix is right.  The euro is done for at this point.  The question is only how much damage will it do to the world economy, and given that the world economy is on life support as it is, this is likely to be horrifically bad when the dominoes finally stop falling.

Sadly, it's going to be the average European who is going to suffer...followed very, very closely by the average American.  And if you think the Fed will be allowed to step in to save Europe, remember that the Republicans made sure we couldn't even save ourselves.

Time to start thinking about what could happen when the euro does collapse, never mind the "if" part.

Hint: worst case scenario here is "years of global depression and 20% listed unemployment" which would be about 40%-50% in real terms.  In other words, game over.  And at this point, we're not even players in the game to stop it.