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Philip Whyte, an economic analyst with the CER, said the spending cuts and tax increases could push parts of Europe into a prolonged slump. He also said the kind of unrest this month in Greece, when protesters firebombed police and set fire to a bank that left three dead, could spread. "Greece is the thin edge of the wedge, and not just in southern Europe.

Experts, including Charles Grant, director of the Centre for European Reform, do not exclude the possibility of Greece exiting down the road. But the rest are likely to 'muddle through,' he argues. "There is a lot of hot air about the eurozone breaking up," says Grant. "'But don't underestimate the political will there is to keep it together."

"Other euro members won't be able to put their public finances on a sustainable footing if their economies cannot return to economic growth," says Simon Tilford, chief economist at the Centre for European Reform. "It's all very well to talk about the need for greater fiscal discipline - that's only one element of the problem, which is why Germany's strategy lacks any real credibility with the markets or with its European partners.

"The Germans are no closer to understanding that the markets are not the problem," says Simon Tilford, chief economist at the CER. "The markets are right to be uncertain about the sustainability of the euro zone in its current form."

Charles Grant, director of the Centre for European Reform (CER), said that - now in government - the Conservative leader was likely to come across as being "much less eurosceptic than people feared." The timing of the visits was especially interesting. "The euro crisis is prising apart Franco-German relations. It is a great opportunity for Britain to lead in Europe, if it has the ideas and a constructive attitude," Mr Grant told the BBC on Thursday.

"This sends a very unfortunate message," said Simon Tilford, chief economist at the Centre for European Reform, a London-based think tank. "It again suggests that the Germans are no closer to understanding that the markets are not the problem here. The markets are right to be uncertain about the sustainability of the eurozone in its current form. … What is specific to Germany is a readiness to make unilateral announcements on things that would only be doable if they were done collectively," said Tilford. "It's pretty populist stuff.

"EU diplomats exude optimism when asked about China," wrote Katinka Barysch of the Centre of European Reform. "Chinese leaders, unlike most Russians and Americans, like and respect the European Union." … "Wishful thinking," was how European analyst Charles Grant termed Europe's China fixation. … Grant says "We have suffered more from yuan manipulation than the US."… the EU "should abandon the fiction of a 'strategic partnership' which cannot be meaningful when the values of the two sides are so different."

By 2020, argues Charles Grant, director of the Centre for European Reform in London, the southern European tier could become Europe's most competitive and dynamic region provided it finally moves ahead with reforms that limit government spending, cut inflated public payrolls, and open up overregulated labour, product, and service markets that have stifled growth, productivity, and competitiveness in these economies.

A separate report, published this month by the Centre for European Reform in London, says NATO needs to address the security concerns of newer members in central and eastern Europe. … "Some of the allies worry that NATO would not be able to come to their defence in a crisis," said Tomas Valasek, one of the authors of the London report, who also was a civilian adviser to Ms Albright's group.