Economist John Makin explores, in his latest Economic Outlook, why the Eurozone crisis has worsened so quickly in recent weeks and what options this leaves for Europe.

Europe is now battling an acute systemic debt crisis that threatens the global financial system and the global economy. This worsening crisis constitutes the largest single threat to the US economy and its financial system

When the G8 major economies convened at Camp David last weekend, the continuing crisis of the euro, common currency of 17 European Union (EU) members, dominated the economic discussions. The agonies of Greece, badly divided in recent parliamentary elections, and forced to vote again on 17 June, were at the forefront.

As we enter the fall of 2011, three years after the Lehman Brothers crisis, Europe and the United States are teetering on the brink of another, potentially more serious, systemic crisis.

Case studies of European states--Germany, France, the United Kingdom, Poland, and Sweden--suggest the need for greater defense cooperation and pooling of military resources among European states.

We need good economics over politics, now more than ever. That means sensible tax reform, a Fed focus on maintaining liquidity, and rationalization of the European monetary system.

The evolving narrative of the events of 2008 represents a similar error in our understanding. The current metaphor seems to be that the global economy was hit by a "perfect storm" of disruptive forces late in 2008.