The months ahead in 2011 will constitute a summer to remember for a long, long time.

The world’s two largest economies ― the United States and Europe ― are drifting toward brutal days of reckoning. Both economies face severe financial and economic challenges.

Failure by either or both would send severe shocks through the already limping global economy. In the United States, a fiercely aroused but inexperienced extremist Republican bloc with control of the House of Representatives has been saying for months that it will not vote to raise the debt ceiling unless deep cuts in the federal budget are accepted by the president and the Senate. If they make good on this threat, the consequences could be a default by the U.S. government on its debt, or an interruption of vital payments to senior citizens, health providers, veterans and others ― or even both. There would be turmoil in the global financial markets, and the privileged position accorded the American economy and government globally would be lost for a generation at least. The price to pay for that will be steep indeed.

In Europe, the crisis stems from the inability of a handful of countries ― Greece is the most visible ― to meet their debt obligations and provide essential services to their citizens. They need to enter into what is called a “workout”: an orderly process whereby all the stakeholders agree to receive less than they would ordinarily expect in order to return to a sound financial basis, and thereby avoid even greater financial losses.

For Europeans this is a definitive test of what they call the “European project”: the agreements assembled over the half century following World War II that established close economic cooperation, a federal overlay of political institutions for countries that historically had regularly warred with each other, and a common currency. These, plus the American-led creation of the North Atlantic Treaty Organization, have made Europe a remarkably successful federation of formerly independent nation states, and they have made the European continent the most peaceful region on this planet since World War II.

So as Europeans and Americans alike head to the beaches and mountains for their summer vacations, a lot is at stake.

The United States has strong and resilient political institutions, but it may not have the political leadership required to steer a firm course through this crisis. President Barack Obama has tried to find center ground on budget and economic issues in the face of the boisterous Republican majority in the House, but he has failed to establish much credibility with the public, the markets or legislators on these issues.

The possibility exists for the United States to wriggle through this summer to a ragged compromise that avoids immediate disaster, but still reveals a political condition unreliable and unpredictable enough to cause continued erosion of confidence in the American financial system at home and abroad.

For the most part, Europe enjoys experienced and competent political leadership, but the EU-wide institutions as they exist today may not possess the constitutional power and range needed to deal with the excess borrowing and bloated budgets at national levels that threaten to undermine them. Every attempt the European Union makes ― and there have been several so far to stabilize the Greek, Portuguese and Irish situations ― that turns out to be only a partial solution simply spawns more doubts and raises the cost and disruptive potential of the next attempt. The approach required now is one that stabilizes the entire euro zone, and the Europeans have not yet faced up to that reality.

Stay tuned. The summer roller coaster ride is just beginning.

By Peter Goldmark, Newsday

Peter Goldmark, a former publisher of the International Herald Tribune, headed the climate program at the Environmental Defense Fund. ― Ed.

(McClatchy-Tribune Information Services)