The Euro crisis: Eliminate the impossible and we are left with the improbable

Too little, too uncertain, too late - that has been the response of EU leaders to the Eurozone debt crisis. Delay has neutered the measures taken and now options thought improbable have moved centre stage. One reason why I have been at the forefront pushing for more and quicker action has been an awareness of the conflicting views forming the headwind which EU leaders have to move against. Another has been market savvy, a factor distinctly missing in the undisciplined messages of Eurozone leaders. TheUKalso stayed too long on the sidelines saying 'we are not at the centre of the problem; we are not in the Euro'.

Even outside the Eurozone we are intimately linked to the fate of the Euro and other countries' sovereign debt through the interconnection of our banks. But while the City trembled, majorUKnews providers did not pick up on the warnings, even from Mervyn King, that the Bank of England was putting in place contingency plans. More recently, there has been news overage - in between phone hacking and riots - the latter postponing Sky News' pursuit of me while on holiday.

However, we are not at the end of this story. Analysts indicate much larger sums are now needed to stabilise markets. Merkel will not give in yet because German public opinion does not see a direct threat - which is wrong - and because genuine bailout via a 'transfer union' or Eurobonds is no way to guarantee future fiscal probity - which is correct. More will surely have to give, whether that is via the European Central Bank and subsequent recapitalisation, a rehash of the rescue funds, or limited Eurobonds.

For Germany, on top of the banking interconnection, there is the fact that the competitiveness of the Euro, due to more profligate countries being in it too and holding down its exchange rate, is worth €100 billion a year. Whereas the hated 'transfer union' subsidy through immediate Eurobonds has been calculated to cost €15 billion a year.

In any case, failure of the Euro would cost a lot more to Europe - theUKincluded.

ENDS

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