Byline: Robert J. Samuelson

As a nation reels from an earthquake's destruction, an entire continent faces an economic crisis of its own.

While the world has been transfixed with Japan, Europe has been struggling to avoid another financial crisis. On any Richter scale of economic threats, this may ultimately count more than Japan's grim tragedy. One reason is size. Europe represents about 20 percent of the world economy; Japan's share is about 6 percent. Another is that Japan may recover faster than is now imagined; that happened after the 1995 Kobe earthquake. But it's hard to discuss the "world economic crisis" in the past tense as long as Europe's debt problem festers--and it does.

Just last week, European leaders were putting the finishing touches on a plan to enlarge a bailout fund from an effective size of roughly [euro]250 billion (about $350 billion) to [euro]440 billion ($615 billion) and eventually to [euro]500 billion ($700 billion). By lending to stricken debtor nations, the fund would aim to prevent them from defaulting on their government bonds, which could have ruinous repercussions. Banks could suffer huge losses on their bond portfolios; investors could panic and dump all European bonds; Europe and the world could relapse into recession.

Unfortunately, the odds of success are no better than 50-50.

Europe must do something. Greece and Ireland are already in receivership. There are worries about Portugal and Spain; Moody's recently downgraded both, though Spain's rating is still high. The trouble is that the sponsors of the bailout fund are themselves big debtors. In 2010, Italy's debt burden (the ratio of its government debt to its economy, or gross domestic product) was 131 percent; that exceeded Spain's debt ratio of 72 percent. Debt ratios were high even for France (92 percent) and Germany (80 percent).

As these numbers suggest, there's no automatic threshold beyond which private investors refuse to buy a country's debt. Germany and France are considered sound investments, deserving low interest rates, because their economies are judged to be strong. …