Credit: Newsday / Audrey C. Tiernan

I've spent the past week in Europe. Front-page headlines track the events in Libya, the Mideast and Japan. But just below the surface lies a broader uneasiness focused on Europe's ongoing financial crisis.

This crisis of "d & d" -- debts and deficits -- has been a central preoccupation for over a year, testing the fabric of what is called here "the European Project." Business executives I've talked with agree that the stakes are high. They see great danger, and also great opportunity. Does Europe have the institutions and the political resilience to get its financially failing members -- Greece, Portugal, Ireland and Spain for starters -- onto a track of stability and recovery? Can the partners in the European Project finally get their economic governance right?

The European financial machinery created a decade ago when the euro was launched does not provide a single communitywide decision-making body through which paramount economic issues can be settled. The toughest questions have to be negotiated among the partner countries, and the two at the center of this process are Germany and France, the largest economies in the euro zone.

A critical issue is to what degree, and on what terms, can Germany (far and away the biggest and strongest economic power in Europe) be brought to finance the workout for the weaker ones? What rules of fiscal discipline will be imposed going forward and who will enforce them? A key source of the current mess is that no one monitored the budget guidelines the European Union optimistically adopted for its member states.

If the Europeans cannot find a way out of their hyper-indebtedness and deficits, Europe's competitiveness, and in particular Germany's economic strength, will suffer. The weaker states will have nowhere to turn for financial help but to the stronger ones.

If the euro does not remain viable, the weaker economies in the EU will take it on the chin, as growth is stifled and Europe's vulnerability to the cost of imported energy and raw materials becomes even greater. But if the austerity that Germany demands is too severe -- killing recovery and triggering too much suffering -- then for the first time since World War II, public sentiment in Europe may turn against cooperation and against Germany, and blow the Union apart.

Meanwhile, bond rates for the weak sisters in the EU are skyrocketing, which means the markets think more trouble lies ahead. Greek bonds zoomed past 12 percent last week, and rates for Ireland, Portugal and Spain rose with them.

There are echoes of the U.S. situation in this picture: mountains of debt, large deficits, rising currents of economic fundamentalism, volatility arising from reliance upon imported energy, and political difficulty in getting the balance right between austerity and recovery. But for the most part, Europe and the United States are addressing their huge economic problems independently. The central banks cooperate, fortunately, on monetary policy. But the fundamental dilemma of how much contraction to inflict how fast and who pays for it -- and the coarse politics surrounding that -- are being played out in Europe without reference to the United States. The Europeans do not think we understand their problems. They see the Obama administration as more interested in talking with China than in working with America's historical partners in Europe.

We are at an interesting and fateful moment: The two largest economies in the world are wobbling. Neither can continue much longer on their present diet of "d & d," driven by excessive consumption and imports. The third largest, China, continues to grow relentlessly. Like Europe and the United States, the Chinese are dependent on imported energy; unlike Europe and the United States, they're a creditor nation and a net exporter, not a debtor and net importer.

European heads of government met at the end of the week to hash out their next steps. When the smoke clears and the adjectives are parsed, we'll see whether it was a small step or a big one. In the United States, it's hard to say we're taking any steps at all.