As Congress prepares to vote on he increase in the US debt ceiling, it is salutary to reflect on the way that a routine Congressional vote has very nearly turned into an existential crisis for the United States itself.
We can hope that the vote marks the nadir of the US crisis, and indeed there are some signs that, despite recent disappointing growth numbers, America may now be turning the corner.
In the UK too, several indicators are showing some improvement: in particular the Coalition is currently ahead of its plans in the process of deficit reduction. The determination of the British government has been rewarded by Gilts now trading inside US Treasuries for the first time in many years. The political horsetrading in the UK has actually led to progress in deficit reduction, a sharp contrast to the US which still faces a rising tide of red ink, unless the growth outlook improves soon and the politicians continue to bicker.
So if the US has indeed avoided the catastrophe of default, then we may now see some stabilization on that side of the Pond. Yet in Europe, there remain significant issues to address before the crisis can be said to be over. The collapse of the Cypriot government is merely the latest manifestation of the way that the market is testing to destruction the weaknesses in the Euro system.
The solution is increasingly clear: a much deeper monetary union, including a transfer union is increasingly likely. This, of course, raises significant political issues, particularly in Germany, but I have been struck in recent weeks by the readiness of German policy makers to commit to this deeper union. For the UK, that may mark the parting of the ways with the EU, at least in the short run.
Yet, if the Euro is ultimately successful, it will be yet another European project that the UK initially opposes outright, then reluctantly agrees that others may participate in, if the they wish, although the UK will not, and ultimately which the UK still finds it imperative to join. It may be a decade or two away, but short of the break up of the EU- which many Tories openly advocate- I suspect that the pattern will indeed repeat itself and that far from enjoying our isolation, we will chose once again to engage with the EU, albeit a decade or two late..
However, as the Americans avoid default by the skin of their teeth, we are still not out of the woods- in Europe or America- yet.