A senior policymaker told me last week that the present situation reminded him of the 1992 crisis of Europe's exchange rate mechanism, when one country after another became subject to speculative attacks – leading to the expulsion of the UK and Italy from the system. In a monetary union, you can no longer bet on exchange rates. But thanks to credit default swaps, you can place convenient bets on the break-up of the eurozone. Last week, speculators bet on an Irish default, and these bets make it more expensive for Ireland to refinance its debt, thus threatening to turn into a self-fulfilling prophecy.

But Ireland is not the biggest danger for the eurozone. If the country goes down, the eurozone will bail it out. Even the Germans accept this now. A far more imminent danger lurks in central and eastern Europe. The possibility of a financial collapse there is the most urgent policy issue the European Union must confront at this point. If mishandled, it could bring down the eurozone.

The crisis has hit central and eastern Europeans so disproportionately hard because of two policy errors by their governments. The first was to encourage households to obtain mortgages in foreign currencies. In Hungary, almost every mortgage is a foreign currency mortgage, mostly denominated in Swiss francs. The choice of Swiss francs is plainly ludicrous – testimony to economic illiteracy. I could just about understand foreign currency borrowings in euros, since Hungary will eventually join the eurozone. But Hungary will presumably not join the Swiss Federation. The money that Hungarian households saved on cheap Swiss interest rates has been more than wiped out by the rise in the Swiss franc.