Europe may have taken an historic step in its meeting on Thursday – it seems, for once, to have done more than “just kick the can down the road”. First, its leaders recognised that it is not just Greece that faces a problem; it is a European problem, which requires a European solution.

Second, the leaders recognised that Greece’s problems require a focus on debt sustainability – lowering the debt burden and increasing gross domestic product, and Europe is doing something about both.

The European Union has once again reiterated its resolve to a quick return to fiscal rectitude (at least for those countries not in crisis). Europe’s recovery, however, is still frail and excessively quick cutbacks will slow growth, and even risks a double-dip recession. Lower economic growth will be bad even from a narrow view of deficits and debt.

Europe faces a critical juncture on Thursday – one that may determine not only whether the euro will survive, but whether the global economy will be once again plunged into turmoil. To an economist what needs to be done is simple and clear: Greece’s debt has to be brought to a sustainable level. That can only be done by lowering the interest rate that Greece pays, lowering its indebtedness, and/or increasing gross domestic product.

The problem facing the Europe is not so much economic as political. It is easy to see what should be done. If it issues eurobonds – supported by the collective commitment of all the governments – and passes on the low interest to those in need – debts are manageable. Europe can access capital at low interest rates; after all, its collective debt to GDP ratio is actually better than that of the US. The resolution of this crisis is easily within grasp. It is not a matter of economics. It is only a matter of political will.

As Europe stands at the precipice, it is time to end brinkmanship and political squabbles.