The latest piece by Ambrose Evans-Pritchard of the Telegraph highlights a disturbing error this deep into the crisis. Angela Merkel is still referring to this crisis as a debt crisis:

Angela Merkel told German industry today that we are not facing ”a euro crisis, but a debt crisis.”

He goes on to describe why this is wrong:

“She is wrong. Total levels of private and sovereign debt in the eurozone are lower than in the U.K., the U.S., and far lower than in Japan. …Not because of debt, except in the most superficial sense. The reason this crisis keeps grinding ever deeper is because the euro itself is a machine for perpetual destruction. The currency is fundamentally warped and misaligned. It spans a 30pc gap in competitiveness between North and South. Intra-EMU current account deficits have become vast, chronic, and corrosive. Monetary Union is inherently poisonous.”

Now we’re making progress! Mr. Evans-Pritchard has an enormous audience in Europe so hopefully his message will get through to some extent. You can’t resolve a disease if you don’t even understand what’s causing it. Merkel’s comments are eerily similar to what we heard from Ben Bernanke and Hank Paulson in 2008 when they misdiagnosed a household debt crisis as a banking crisis. Europe must understand that this is a currency crisis and that there is only one true fix — the creation of an autonomous Europe. Mr. Evans-Pritchard thinks that can best be done via a split in the Euro (which would still require a central Treasury) or dissolution. I have said there is a third option — a United States of Europe. But we can’t expect them to move in the right direction if they still think this is a banking and debt crisis. That will simply lead to bank bailouts and the American disease of bailing out banks without fixing the actual cause of the economic problem.