At a meeting in Rome last Thursday, the heads of state of Germany, France, Spain and Italy agreed on steps towards a banking union and a modest stimulus package to complement the fiscal compact. But Angela Merkel resisted all proposals to provide relief to Spain and Italy from the excessive risk premiums prevailing in the market. This threatens to turn the EU summit this week into a fiasco that may well prove fatal because it will leave the rest of the eurozone without a strong enough firewall to protect it against the possibility of a Greek exit.

Even if a fatal accident can be avoided, the division between creditor and debtor countries will be reinforced and the “periphery” countries will have no chance to regain competitiveness because the playing field is tilted against them. This may serve Germany’s narrow self-interest but it will create a very different Europe from the open society that fired people’s imaginations. It will make Germany the centre of an empire and put the “periphery” into a permanently subordinated position. That is not what Ms Merkel or the majority of Germans stand for.

Ms Merkel argued that it is against the rules to use the European Central Bank to solve the fiscal problems of member countries –and she is right. ECB president Mario Draghi has said as much. There is a missing element in the current plans for the summit: a European Fiscal Authority that, in partnership with the ECB, could do what the ECB cannot do on its own. It could establish a debt reduction fund – a modified form of the European debt redemption fund that was proposed by Ms Merkel’s council of economic advisers. In return for Italy and Spain undertaking specified structural reforms, the fund would acquire and hold a significant portion of their outstanding stock of debt.