So the crisis is getting ever deeper. Tensions in financial markets have risen to new highs as shown by the historic low yield on Bunds. Even more telling is the fact that the yield on British 10 year bonds has never been lower in its 300 year history while the risk premium on Spanish bonds is at a new high.

Agreed, the crisis is deepening. It is becoming increasingly obvious to all that the debtor nations: PIIGS, simply cannot repay the debt that their economies labour under.

The real economy of the eurozone is declining while Germany is still booming. This means that the divergence is getting wider. The political and social dynamics are also working toward disintegration. Public opinion as expressed in recent election results is increasingly opposed to austerity and this trend is likely to grow until the policy is reversed. So something has to give.

I would disagree that Germany is booming. Germany is also experiencing an export slowdown. In addition Germany has put itself in a position through the assumption of its creditor status and the assumption of European liabilities, of massive capital destruction.

In my judgment the authorities have a three months’ window during which they could still correct their mistakes and reverse the current trends. By the authorities I mean mainly the German government and the Bundesbank because in a crisis the creditors are in the driver’s seat and nothing can be done without German support.

There is pretty much nothing Germany can do. The answer is that the PIIGS have to create production of goods and services in their own economies. Simply going further into debt is no answer at all.

I expect that the Greek public will be sufficiently frightened by the prospect of expulsion from the European Union that it will give a narrow majority of seats to a coalition that is ready to abide by the current agreement.

Which is exactly how it played out.

But no government can meet the conditions so that the Greek crisis is liable to come to a climax in the fall. By that time the German economy will also be weakening so that Chancellor Merkel will find it even more difficult than today to persuade the German public to accept any additional European responsibilities. That is what creates a three months’ window.

The German public it seems, has had enough.