How do you square this one? Most economic historians and international economists I know believe a monetary union would fail unless it develops into a fiscal union. Yet, almost all political and legal experts who specialise in the European Union believe a fiscal union is Utopian. If both are right, a fiscal union is simultaneously necessary and impossible. And that would mean – again if both are right – that the euro is doomed to fail.

Of course, it is not clear that both are right. But we should not be surprised to find that investors, when confronted with such informed opinion, avoid the bond markets of peripheral Europe. This is a perfectly rational response to even minimal uncertainty. I am hearing accounts of wealthy families switching their entire savings portfolios into Swiss banks. A quiet bank-run is under way in large parts of the eurozone, not only in Ireland.

The return of investor confidence requires clarity about the future of the euro and the future institutional set-up. This is why the debate about fiscal union is so important. I have yet to be convinced that any rules-based system, that obsesses with fiscal deficits and nothing else, can prevent private sector imbalances and financial instability. A well-constructed fiscal union, by contrast, could deal with the sources of instability. Here is how.