In Washington they are arguing about a debt ceiling; in Brussels they are staring into a debt abyss. But the basic problem is the same. Both the US and the European Union have public finances that are out of control and political systems that are too dysfunctional to fix the problem. America and Europe are in the same sinking boat.

The debt debates underway in the US and the EU are so inward-looking and overwrought that surprisingly few people are making the connection. Yet the links that make this a generalised crisis of the west should be obvious.

On both sides of the Atlantic, it is now clear that much of the economic growth of the pre-crisis years was driven by an unsustainable and dangerous boom in credit. In the US it was homeowners who were at the centre of the crisis; in Europe, it was entire countries like Greece and Italy that took advantage of low interest rates to borrow unsustainably.

The financial crash of 2008 and its aftermath dealt a blow to state finances, as public debts soared. In both Europe and the US this one-off shock is compounded by demographic pressures that are increasing budgetary pressures, as the baby-boomers begin to retire.

Finally, on both sides of the Atlantic, the economic crisis is polarising politics, so making it much harder to find rational solutions to the debt problem. Populist movements are on the rise – whether it is the Tea Party in the US or the Dutch Freedom party or True Finns in Europe. Read full article in Financial Times – registered users...