Dream of United Europe frays at the edges

"The Greek economy is in free fall, having contracted 15 per cent under existing austerity measures", says Simon Tilford, the chief economist with the CER in London.

There is consensus that the failure of Italy would almost certainly set the dominoes falling across the zone because Italy is too big to bail out. ''Its economy is three times as big as the Irish, Greek and Portuguese economies put together,'' Tilford says. If Greece leaves, that will make departures by others much more likely and, if Italy left, ''France would be under huge pressure,'' Tilford says. ''France assumes that if Greece and one or two other states left, that its status as a core part of the euro zone would be secure. But that's far from clear. Its borrowing costs are already higher than Greece's. If Italy goes, France will go, because it won't be able to reassure investors.''