If Germany and its hard-money allies genuinely wish to save the euro – which is open to doubt – they should stop posturing, face up to the grim imperative of a Transferunion, and desist immediately from imposing their ruinous and reactionary policies of debt deflation on southern Europe and Ireland.
One can sympathise with the German people. Their leaders in the 1990s told them "famine in Bavaria" was more likely than the preposterous suggestion that Germany might have to bail out countries as a result of EMU.
But events have moved on and, rather than striking tones of Calvinist righteousness, the Teutonic bloc might do well to acknowledge equal responsibility for the capital flows, trade imbalances, and cumulative errors that caused the EMU debacle, and therefore accept that the honourable course is to meet the struggling south halfway.
Readers may have a better menu, but here is my own rough sheet: a debt union, funded by Eurobonds; a calibrated jubilee on traditional IMF lines for Ireland, Greece, Portugal, and if necessary Spain, to occur in parallel with austerity cuts; and a monetary blitz by the European Central Bank to prevent the victims tipping into core deflation, even this stokes inflation of 4pc or 5pc in northern Europe.
It beggars belief that the ECB should continue to allow the contraction of the M3 money supply and credit to private firms. Since EU leaders have already shown their willingness to ram through treaty changes without full ratification under Article 48 of the Lisbon Treaty, they can likewise bring ECB ideologues to heel with a new mandate.
If the Teutonic bloc cannot accept such a political revolution, it should withdraw from monetary union before inflicting any more damage to the social fabric of southern Europe, or at least allow a 30pc appreciation within EMU by creating a Doppelmark.
An internal adjustment could be done overnight, if necessary with temporary capital controls. The residual euro states would undergo a relatively seamless devaluation to levels that reflect the reality of current account deficits and labour productivity, yet their existing contracts in euros would be upheld.
Creditor states – and Britain – would have to stand ready to recapitalise their own banks at great cost to fortify them against the systemic shock of haircuts on the entire debt stock of peripheral EMU. True burden-sharing at last.
Needless to say, EU leaders failed to grasp the nettle at last week's summit, despite a pre-insurrectional mood in Athens where one former minister was bludgeoned by anarchists outside parliament, and in Rome where a police officer was almost lynched in political violence that left 80 people injured.
Not even the warning shot of Spain's debt auction on Thursday seemed to break the impasse. Chancellor Angela Merkel must know that the Spanish state, juntas, and banks cannot refinance €300bn (£254bn) next year at a bearable cost if the Tesoro is already paying a decade-high of 5.45pc to sell 10-year bonds, yet she continues to play for time she does not have.
"Behind the curve", was the understated rebuke by IMF chief Dominique Strauss-Kahn.
His own IMF team has indicated the policy that it is being told to enforce as junior partner of the EU rescues. It warned of "adverse fiscal and financial feedback loops" in Ireland, in its latest report.
"A prolonged period of deep recession could weaken loan repayment capacity of households and businesses and increase bank losses beyond current projections, leading the economy into a negative spiral. Wage and price deflation – coupled with contraction in activity – could have a powerful negative effect on debt dynamics," it said.
"There are significant risks that could affect Ireland's capacity to repay the Fund," it said. Indeed, so why is the IMF board giving a green light to this obscurantism?
The EU torture policy of thrusting yet more debt on crippled states already caught in a debt trap – and then forcing them even deeper into downward spiral with a 1930s policy of wage cuts and "internal devaluation" – is an intellectual disgrace.
Let it never be forgotten that Ireland and Spain are struggling because EMU caused a collapse in real interest rates to -1pc or -2pc, setting off an uncontrollable boom. This is what the Gold Standard did to Germany in the late 1920s, when US banks funded a German credit bubble. That ended with the destruction of German democracy.
Klaus Regling, the EU's chief bail-out officer, said Eurosceptics will "eat their words again" as the policy is vindicated. Excuse us, Dr Regling, but we have not yet eaten any words on the fundamental critique of EMU. Perhaps it is unkind to point out that Dr Regling was the European Commission's director-general of economic affairs from 2001 to 2008, more or less spanning the incubation period of the catastrophe now at hand.
To borrow the immortal line from Watergate: what did you know and when did you know it?
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