With the Greek financial crisis continuing to worsen, it is becoming increasingly clear that the entire single currency project has reached a crossroads. With the seemingly inevitable Greek debt default confronting the ECB's suicidal determination to prevent write-downs, something must give.
Regardless of what happens at this week's emergency meeting of eurozone finance ministers or at next weekend's EU leaders' summit, it is already obvious things cannot go on like this. Ever since the extent of the Greek financial crisis began to emerge 18 months ago, the eurozone has lurched from one crisis to the next. Instead of either implementing the reforms required to make the euro work or walking away from the single currency project altogether, Europe's leaders have instead opted for a series of ad hoc "solutions", including the May 2010 Greek bailout, the November 2010 Irish bailout, and the May 2011 Portuguese bailout.
Unfortunately, as none of these measures have addressed the underlying issues -- the massive loss of competitiveness suffered by the eurozone periphery versus its core, and the huge overhang of debt in the peripheral eurozone countries -- they haven't worked. Now, just 13 months after its first bailout, Greece is back looking for more.
However, as this week's events in Athens demonstrate, a Greek bailout Mark II won't work. Not alone will the ever more savage austerity measures being demanded by the EU and the IMF plunge the Greek economy even deeper into recession, it should by now be clear that we are rapidly approaching the political limits of austerity. People will only make sacrifices if there is some hope that, by so doing, better days lie ahead.
Greece has already reached that point. Ireland and Portugal have yet to do so but, if events in Greece are any guide, we are closer to it than most of us might think.
What the events of the past 18 months have done is to show up the huge flaws in the architecture of the eurozone. The euro is virtually unique in being a currency without a country. Whereas all of the world's other major currencies are issued by and circulate in just one country, the euro is the official currency of 17 different countries and the de facto currency of an 18th, Montenegro.
That matters. Where a currency is issued by just one country there are inbuilt stabilisers to protect the economically-weaker regions. With a single tax and social security system, these peripheral regions automatically receive transfers from more economically dynamic core regions in the event of a downturn. Economists reckon that these transfers can represent up to 40pc of the value of economic activity lost to the core regions.
Unfortunately, with no common treasury or taxation system, such transfers are not possible within the eurozone. And there's the rub. Can you have a common currency without a common treasury? Economic history suggests not.
So the question facing the eurozone core -- basically Germany -- is this: is it willing to fund the transfers that the peripheral countries need to compensate them for their loss of competitiveness? If the Germans and the other core eurozone countries are unwilling to do so then maybe it's time to call a halt to the single currency project before it does even more damage to relations between Europe's countries and peoples.