By:John_Mauldin

I have contended for some time that Europe is faced with two   choices: Disaster A, which is the break-up of the eurozone, or Disaster   B, which is the creation of a fiscal union, which keeps the euro more or   less intact. Over the last few months I have come to realize that there   is indeed a third option, which now looks increasingly possible. This   is rather sad, as the third option is just an even worse Disaster C.   Each choice carries with it its own unique set of problems, but the   outcome of any of the choices will be that the people of Europe face a   serious recession, if not a depression. This will impact global growth   for more than a short time and, depending on the choice, could plunge   the world into a crisis as bad as or worse than the recent credit   crisis. In today’s letter we look at all three choices, meanwhile musing   on how we arrived at the bottom of such a deep hole, shovels flailing.“Breaking Up is Hard to Do” was written and sung by Neil Sedaka.   It was a #1 hit exactly 50 years ago this week. And while that song was   written for a different era, it could be the theme song for much of   Europe today.

“Don’t say that this is the end. Instead of breaking up, I wish that we were making up again.”

And indeed Europe is quite the dysfunctional family, seemingly   always on the verge of breaking up, but somehow managing to patch up the   differences. We all have a family member (or two or three) who cause   that sort of trouble. We watch the incessant squabbling with unease,   wishing they would just settle things and move on. They never deal with   the real issues, as that would mean facing too much personal angst and   maybe even lead to an admission that the problem is not just with the   other party. The euphoria of the initial relationship has been lost in   the reality of day-to-day existence. Now, they either sort it out or   break up.

These sorts of relationships devolve into co-dependency, where no   one is happy. And the rest of us are liable to get sucked in. Even   though it’s uncomfortable to be around these people, we still have to   interact. But don’t you wish they would get some serious therapy?

And Europe was again acting out this week. First, Italian Prime Minister Mario Monti gave an interview to Der Spiegel, in which he warned of the disintegration of Europe if the European   Union

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