Will the eurozone survive in its current form? To address this question, we need to consider three more precise issues. First, how likely is a wave of sovereign defaults? Second, will the eurozone make the changes needed to prevent these? Third, could the eurozone survive them? My answers, in turn, are: quite likely; probably not; and perhaps – but not with certainty.

What has been happening is familiar to experts on emerging countries: this is a “sudden stop”. Before 2007, credit was available on easy terms to fund asset price bubbles, construction and consumption, private and public. Then, suddenly, markets shifted towards sobriety: funding dried up, house prices collapsed, construction crashed, governments guaranteed the debts of raddled financial systems, economies slumped and fiscal deficits exploded.

As Carmen Reinhart, of the University of Maryland, and Harvard’s Kenneth Rogoff noted in a paper released early this year, “in a crisis, government debt burdens often come pouring out of the woodwork, exposing solvency issues about which the public seemed blissfully unaware”. So it has been in the eurozone periphery. Greece hid its true fiscal position. In Ireland and Spain (as in the US and UK), the boom covered up vast contingent fiscal liabilities. Also striking has been how closely the riskiness of banks correlates with that of sovereigns. The latter are in trouble partly because some banks are too big to fail and too big to save.