Europe and the U.S.

Of course you could hardly have the U.S. Treasury Secretary expressing public doubts about Europe’s capacity to resolve the situation:

“Europe has the capacity to manage through this,” Geithner said in an interview on Bloomberg Television’s “Political Capital With Al Hunt,” airing this weekend. “And I think they will.”

Geithner, 48, said he doesn’t think the European turmoil will hurt U.S. growth because “our economy is getting stronger. We’re seeing a lot of strength, improvement and confidence.”

Europe really does have the capacity to manage this. But what needs to be done is politically difficult and it’s institutionally difficult, so I think there’s good reason for a fair amount of skepticism that it can ultimately be done. And if it’s not possible to pull off deeper integration, then some kind of breakup of the Eurozone that would deepen the crisis seems inevitable. Nor is it really all that clear to me that the U.S. economy actually could take such an event in stride. The Eurozone is our biggest trade partner on both the export and the import side.