History may well look back on Europe’s early 21st century sovereign debt crisis by asking the central question of why having seemingly set up an acceptable basis of political and economic infrastructure sufficient to allow for the adoption of a single currency why it was that the embodiment of the combined European Union and Euozone authority completely failed to police the rules that they put in place. History may well also ask why one single nation state such as Greece which had been the tenth to join the European Union back in 1981 and that last year had GDP of just EUR230bn meaning that it accounted for just 2% of combined European Union GDP could bring not only the single European currency but also quite possibly the European Union to its knees.

Living through the sovereign debt crisis as we are all attempting to do now is no easy place to be and despite the eventual prospect that Europe’s politicians will get their respective act together pain over the next few years will never be far away. It is of course easy with the benefit of hindsight to conclude why the ill devised single currency system has now been laid so low. We all knew it would happen didn’t we and yet we blithely allowed the process to go on because we could at least think that the problem belonged to someone else. We in Britain may have rightly chosen not to join the single currency but we have now learned that we cannot escape the fall out of Europe’s sovereign debt problem. The same is true to an extent in the US and right across big parts of Asia and the Middle East.

The euro will survive of course because the authorities in Brussels, Paris and Berlin will ensure that it does. Be sure too that history will at some future point define the rights and wrongs of this in a very different manner to how we might see that process today. Meanwhile the sludgy waters of Franco/German greed and failure continue to flow through all our back yards. We are far from perfect either and we too for far too long having lived beyond our means are now faced with paying the price. Meanwhile growth across much of Europe is already moribund and at best will most probably stagger from here on the basis of one step forward, one step back for the best part of a generation as the bill for this closed eyes and ears crisis of greed is paid down.

Having written just ten days ago of my hope and belief that post the last G-20 meeting that Europe’s leaders should be given sufficient breathing space to get their act together ahead of next G-20 meeting in a months’ time it seems that markets had other ideas this week. Who can blame them when they have scented beyond uncertainty into the boundaries of unnatural fear. We may suppose that unless some kind of acceptable resolution is found – meaning a plan of real action to refund the worst aspects of Europe’s sovereign debt by the time of the G-20 meeting – we may view with alarm that should politicians fail the prospect that markets will take it in their own hands to trash the prospect that a political resolution to Europe’s woes that contains the euro will ever be found will need to be faced. By then we will not be talking about the need to back moves to recapitalise Europe’s banks it will either have become essential or even be too late. I am an eternal optimist of course which in these unhappy days in markets has become an increasing rarity.

Yesterday in yet another of her so called promises German Chancellor Angela Merkel supposedly backed moves to recapitalise Eurozone banks. “I think” she said “it is important if there is a general view that the banks are not sufficiently capitalised for the current market situation that one does it”. Who ‘one’ is we are not told but we assume national governments. “Germany” Mrs Merkel added “is prepared to move to recapitalise. We need criteria, we are under pressure of time and we need to take the decision quickly” she said suggesting that by the time of the next EU summit a plan will have been put to bed. Somehow though one is left with a feeling of distinct chillness that deep down Angela Merkel does not really understand all the nuances of what she says. What a pity that the European banking authorities and regulators failed to heed the lessons from the oil and airline industry “if you think safety comes at too high cost try and accident”

Days after the Dexia horse bolted the European Banking Authority has once again been asked to ride to the rescue ‘retesting’ EU banks so that it can presumably advise EU officials on the likely level of bank recapitalisation required. Lest we forget this was the same hapless institution that gave the Belgian, French, Luxemburg based Dexia Bank a clean bill of health last year. True the methodology of how banks find the necessary required funding has substantially changed in recent months not only because of political failure but due to the parlous nature of the Greek sovereign debt crisis plus also the severe downgrading by two rating agencies of Italian debt.

It is not much point at this stage placing bets on the level of bank recapitalisation required across European banks sufficient to cover for exposure to countries such as Greece, Italy and Spain but let’s agree that the general consensus is in the region of plus EUR2bn. We note with regret too that until the remaining three EU member states ratify proposed changes that not only can European Stability Fund money not be used to acquire troubled sovereign nation bonds but neither can the assumed increased level of the fund to EUR440bn be taken as a given. Clearly given as US Secretary of State Tim Geithner has rightly questioned how one could possibly achieve EUR2 trillion of required leverage from a mere EUR440bn rescue fund means that the Stability Fund will need to be dramatically increased. That process will take time. Meanwhile the authorities will despite the sensible delay agree to fund Greece one more time before saying that’s it.

I am told that speaking to a group of Macedonian MP’s this very morning that Greek Prime Minister George Papandreou has been telling them that all will be well provided that there is no big explosion. Well, thank you for that Mr. Papandreou and all that I can say is that the best thing you can do now is to shut up and get on with the job of creating a tax system that collects all dues and to put in place a system that rids Greece of state job corruption and everything else. In short I may hope such words haunt you in the years to come.

Adding to the confusion yesterday a somewhat ill advised International Monetary Fund official clouded the waters by suggesting and then being forced to withdraw remarks that the ‘Fund’ was considering buying European bonds. On reading the suggestion my first thought was that only a couple of weeks ago Christine Lagarde was bemoaning that the IMF may not have sufficient funds to take it through the current crisis. Who funds the IMF? You and I do through the respective contribution paid into the fund. As a rule of thumb the larger and more powerful the contributor economically the more that they each pay into the fund. I don’t think so I think I heard you just say if you live in the US or the UK – why should the US pay for Europe’s sovereign debt mess – indeed, why should the UK pay a penny more into the fund than already agreed. That’s that then – not a penny more, not a penny less to the IMF meaning that the process of bond buying has presumably not been discussed internally at the IMF’s Washington DC headquarters but given the quota system of funding by members would unlikely be agreed.

No matter how equity and bond markets are performing there remains an air of quietness across dealing desks right now. It seems that everyone remains risk averse. The payback is that this risk averseness quickly plays through to manufacturers and service industries meaning that the pull the shutters down on investing and creation of new jobs. This in turn reverses into another round of job cuts and all that this does to consumer confidence and spending.

Today the Bank of England might well announce another round of Quantitative Easing which together with the plan to have fund small business through government and by that we mean a separate new lending bank will do no harm but questionably little good either particularly if the former process fuels inflation. Across the English Channel given that this is the final Thursday outing for the outgoing ECB chief Jean-Claude Trichet I suspect that the ‘Bank’ will not change any policy until next month. Let’s hope I am wrong!

Enough except that in analysing the quagmire that Europe finds itself in has perhaps not been helped by the fact that so far there has not really been a single incident of sufficient power to wreak havoc such as the collapse of Lehman Brothers in the US or Northern Rock followed by Royal Bank of Scotland and HBOS in the UK to drive politicians to act. I am reminded of the infamous words of the then UK Chancellor of Exchequer Alistair Darling back in August 2008 at the height of the banking crisis when he said that “the UK is facing the worst economic crisis in sixty years”. Yes, he did know what he was saying and clearly unlike his boss Gordon Brown was prepared to come clean on the seriousness of the plight. As worthy successors Messrs David Cameron and George Osborne know full well the extent of the European sovereign debt problem as they wrestle with its effects here in the UK. What wouldn’t we do to hear in his usual withering manner Jean-Claude Trichet use similar words to those used by Mr. Darling at this afternoon’s press conference adding perhaps that Europe’s politicians now have less than four weeks to get their act together?

Howard Wheeldon is the Senior Strategist at BGC Partners