So the only way out is forward: to make the euro work, Europe needs to move much further toward political union, so that European nations start to function more like American states.
But that’s not going to happen anytime soon. What we’ll probably see over the next few years is a painful process of muddling through: bailouts accompanied by demands for savage austerity, all against a background of very high unemployment, perpetuated by the grinding deflation I already mentioned.
A monetary union requires a political union in order to work, particularly when national economies operate so differently as say Spain and Germany.
Therefore the claim put forward by most British europhiles that it is a purely an economic matter is nonsense. Keeping Britain out of the Euro looks more and more like a very wise decision.