I may not be an expert on European economics, but I know a slow motion disaster when I see it.  And we are seeing a major one coming to a head in the Eurozone right now.

The years of half-measures and misguided austerity have only dragged out the problem and allowed it to fester. Greece is on the verge of default again, and the problem could easily spread to other countries.

The repeated use of failed, too small fixes did accomplish one thing, however.   It allowed bailout fatigue to poison the political environment against the bold actions that would be needed to resolve the situation in the least destructive manner. The fate of the Eurozone now probably rests in the hands of Germany’s chancellor Angela Merkel, and given her handling of the situation to date, that is not at all reassuring.

While I don’t know how the situation will be resolved, I’m pretty confident that short-term outcome is not going to be good. Whatever happens will likely cause a marked decrease in short-term economic growth in the region. While the pain will obviously be noticeable in Europe, the US economy will probably feel some reverberation if things stay on their current frightening path in the Eurozone.

Given the poor shape of the American economy, this blow could easily destroy our current anemic growth and exacerbate the unemployment problem. Even if President Obama manages to get his still too small (and likely doomed) American Jobs Act passed, it probably won’t be enough to make up for both our current lack of aggregate demand and the possible shock from Europe.

Obama election hopes all depend on the economy

President Obama’s popularity and election prospects are tied to the state of economic growth in this country. Yet Obama missed his chance to do more to address unemployment when his party was still in control of Congress. Now the state of the economy will likely pivot on things outside of Obama’s ability to control, in that he no longer has the ability to push through legislative actions.

The largest of those factors is probably what happens in the Eurozone. The difference between modest growth and a dip back into recession for the US could largely depend on a bunch of European politicians and bureaucrats, who so far have been abject failures at taking the correct bold action.

At this point it could be Angela Merkel and the European Central Bank that determine Obama’s electoral fate. For people in the White House, that shouldn’t be a reassuring thought.