The euro crisis -- the basics
1) The EU is not analogous to the US. Comparisons are often made between the EU and the US or between the euro and the dollar. The EU and the US are roughly similar in population and GNP size, and the US is superficially structured as a federation of smaller units. But the analogy doesn't work, and the reasons matter. The US really is one country, in the same sense that France is a country or Germany is a country; it just happens to be a very large country. Each of the 27 nations making up the EU has a separate identity, history, culture, and (often) language, dating back generations or in some cases centuries; in this sense each individual country, not the whole EU, has a feeling of nationhood similar to what the US has. The US grew to its present size by expansion from the original string of former British colonies on the Atlantic coast -- first the country bought or conquered new territory to the west, then Americans moved in and settled, and finally the new territories were divided into states to fit into the country's existing organizational structure. This is why, when you look at a map of the US, the western two-thirds of the country is mostly a mass of rectangles. These states were not ancient nations that joined a federation; they were sketched in with a ruler, in the interior space of a single nation, once the settler population density had become high enough to justify the structure of state government. The EU was formed by distinct, long-established nations joining a loose federation.
A better analogy in American terms would be to imagine the creation of a unified pseudo-government and common currency for the whole of North and South America. Think how unworkable such a merger of dozens of culturally and economically distinct nations would be, and you'll get a better sense of why the EU project can't succeed.
2) The EU cannot become a nation-state. This is why the above matters. There is now much talk of "fiscal transfer", meaning a continuous flow of subsidies in some form from the EU's economically-vibrant Germanic core to the stagnant "PIIGS" (Portugal, Ireland, Italy, Greece, Spain) -- "eurobonds" are the latest incarnation of the idea. If this became a permanent feature of the EU, it could probably save the euro and the EU, but it won't, because German taxpayers will not stand for it. Large-scale fiscal transfer exists in any unified state with economic disparities -- from rich south-eastern England to the rest of Britain, from richer western Germany to poorer eastern Germany, from blue to red states and from urban to rural in the US. Taxpayers tolerate this because the people they are helping are of their own nationality. But a German or Dane will never feel a Greek or Spaniard to be his fellow countryman the way people within a single nation do.
The same problem applies to other aspects of creating a unified nation-state. Consider the free movement of people. In my state, Oregon, half the population was born outside the state, but no one cares much, since most of them came from other parts of the US and are fellow Americans. No European nation would tolerate immigration on such a scale from other EU member countries with their different cultures, languages, and identities. Then there's military power. France and Britain, the only real military powers in the EU, will never hand over their navies and nuclear weapons to the fake government in Brussels. That "government" is not even taking the lead in the euro crisis; it's Angela Merkel, the elected leader of the biggest actual nation in the EU, who is calling the shots.
3) Austerity is exacerbating the problem. The EU authorities (meaning Merkel and her toadies) insist that the problems of the PIIGS are caused by too much spending and debt, and thus have imposed a regime of cuts and a goal of deficit reduction. With unemployment already sky-high in the target countries, the result has been terrible suffering as more jobs are cut and the social safety net frays -- and austerity is hurting deficit reduction, not helping, as rising unemployment means fewer people paying taxes and more claiming benefits. Austerity has the same effect as using leeches to cure anemia. What the PIIGS desperately need, as François Hollande understands, is economic stimulus and a focus on job creation. More people working and paying taxes, and fewer claiming benefits, will reduce the root causes of the deficits. The EU and its supporters appear blind to this, however; see for example this German interview with Greek far-left leader Alexis Tsipras, in which Tsipras explains the reality of the situation while the interviewer robotically regurgitates mindless austeritard clichés.
4) This is a currency crisis, not a debt crisis. Normally, the PIIGS could greatly alleviate their troubles by currency devaluation, which would make their products cheaper to foreign buyers, thus increasing exports and creating jobs. They can't do that now because they are locked into the euro common currency. If they abandon the euro and return to separate national currencies, they will suffer a period of turbulence, but then begin to recover. However, the EU elites (including almost all the establishment political parties in the various countries) are determined to avoid this because they have a deep attachment to the euro for non-economic reasons. Most PIIGS citizens, especially in Greece, themselves don't yet realize that abandoning the euro is the key to solving their problems.
5) So what's the big deal about June? First, Greece is holding a new election on June 17. If Tsipras ends up as head of government and keeps his pledge to openly defy the EU and reject austerity, the EU will likely cut off the bail-out loans and force the Greek government into bankruptcy, from which it can escape only by abandoning the euro and bringing back its own currency which it can control independently. Once this first domino falls, especially if Greece rapidly starts to recover, others will follow.
Second, Spain has reached the brink of default (see this explanation); given German resistance to large-scale fiscal transfer, it too may soon face leaving the euro as the only way to avoid total collapse. Again, the fall of one domino is likely to start a chain reaction.
6) What happens next? Whether in June or later, it seems almost inevitable that most or all of the euro-zone countries will eventually go back to separate currencies, and the euro will vanish entirely or else survive only in the Germanic core (essentially the old D-mark under another name). As to the effects on the world economy, and specifically the US economy and thus our upcoming election, there is plenty of speculation, but nobody really knows. There has never before in history been anything like the euro-zone -- several major nations sharing one currency -- so its break-up, too, will be an unprecedented event. But I think the upheaval will be less damaging than we fear. Because the crisis has dragged on so long, governments and financial institutions have had many months to prepare. The US could even benefit, if foreigners see its institutions and currency as a safe haven in which money can be sheltered from the European storm; this might partly offset whatever bad effects we suffer.
As an American, to speak bluntly, I hope that the euro collapse can be staved off for a few more months so that it doesn't endanger Obama's re-election. But make no mistake, it's coming. The euro experiment has already failed. The only question is how much longer hundreds of millions of people will be forced to suffer needlessly to avoid recognizing this fact.
[For earlier posts on Europe and the EU, see here.]