What exactly is it that the EU has signed on to when approving the Merkel-Sarkozy deal yesterday?
Most everyone not part of an EU government believes that the agreement is the absolute least that could have been accomplished in order to - at least temporarily - stave off disaster in the euro zone.
But the big problem with the agreement is that its success is largely dependent on a bunch of "if's" that are by no means certain of coming about. To wit:
IF the 26 members of the EU can get their paliaments or convince enough of their citizens in a plebicite to go along with the fiscal union plan that would make Brussels the ultimate authority on national budgets, the euro might yet be saved.
IF the bailout fund, the European Stability Mechanism, is fully funded and can attract outside cash from countries like South Korea and China, it can be a credible backstop to an Italian or Spanish default and the euro might yet be saved.
IF the European Central Bank will take advantage of the situation and intervene more forcefully in the bond market, the euro might yet be saved.
IF the European states can somehow roll over $1.2 trillion in debt in 2012, and if the banks can roll over more than $600 billion in debt coming due next year, the euro might yet be saved.
If private investors can be convinced to buy sovereign debt despite the risk that they would end up like the Greek investors and take a huge haircut if things went south, then the euro might yet be saved.
IF the expected deep recession in the euro zone doesn't exacerbate the budget deficits of Italy, Spain, Greece, and the other at-risk nations thus causing bond yields to soar, the euro might yet be saved.
If Standard and Poors and other ratings companies don't downgrade the debt of the euro zone's core countries and initiate a run, the euro might yet be saved.
Felix Salmon, who is no alarmist, is not impressed:
It seems that German chancellor Angela Merkel is insisting on a fully-fledged treaty change - something there simply isn't time for, and which the electorates of nearly all European countries would dismiss out of hand. Europe, whatever its other faults, is still a democracy, and it's clear that any deal is going to be hugely unpopular among most of Europe's population. There's simply no chance that a new treaty will get the unanimous ratification it needs, and in the mean time the EU's crisis-management tools are just not up to dealing with the magnitude of the current crisis.
The fundamental problem is that there isn't enough money to go around. The current bailout fund, the European Financial Stability Facility, is barely big enough to cope with Greece; it doesn't have a chance of being able to bail out a big economy like Italy or Spain. So it needs to beef up: it needs to be able to borrow money from the one entity which is actually capable of printing money, the European Central Bank.
But the ECB's president, Mario Draghi, has made it clear that's not going to happen. Draghi is nominally Italian but in reality one of the stateless European technocratic elite: a former vice chairman and managing director of Goldman Sachs, he's perfectly comfortable delivering Italy the bad news that he's not going to lend her the money she needs. He's very reluctant to lend it directly, he won't lend it to the EFSF, and he won't lend it to the IMF. Draghi has his instructions, and he's sticking to them - even if doing so means the end of the euro zone as we know it.
And there's more bad news, too. All of Europe's hopes right now are being placed in something called the European Stability Mechanism - a permanent successor to the temporary EFSF. Since it's permanent, the ESM is going to have to be constructed with the ability to put out fires of any conceivable size. And as such, it's going to have to be able to borrow enormous amounts of money, and lend them on to countries which have found themselves in trouble.
But that would make the ESM, essentially, a bank. And the European leaders seem determined, today, to prevent the ESM from operating as a bank at all. Which means it will never get the firepower it needs to be taken seriously.
The biggest problem is that if any one or two of those scenarios above fails to come to pass, the fire drill will begin and the collapse will take place. As Salmon points out, the time is past for kicking the can down the road. The problems of the euro zone should have been faced head on and solutions offered.
But they weren't. And shortly, it is probable that Europe - and the rest of the world - will pay for their shortsightedness.