Consent is a key issue here.

European monetary union is founded on a false premise - that a group of countries can share a common currency without a common fiscal policy. The current crisis amply demonstrates the folly of this premise.

Indeed, it is not too hard to imagine that the original architects of the monetary union knew this full well and simply pushed ahead without due regard for the ultimate consequences. For the whole project was always political and not economic as has already been noted.

To my mind there are these possible long-term outcomes to the current situation:

- The union survives with full fiscal union. This is highly unlikely as it would effectively also be political union. If a government has no control over its revenue and expenses it cannot be said to be politically sovereign in any meaningful sense. I don't think either the political class or the voting public in any european country is ready for this. Just look at the abject failure of the last round of referenda. This is where the issue of consent comes in.

- The union dissolves. Highly unlikely as the political desire for monetary union is still strong enough in some sigificant quarters and the fear of how the markets would react to a break-up of the monetary union is even stronger. In practical terms this needn't be difficult - as noted above, currency unions have dissolved before and there are metrics available on which to base the exchange rates for a transition back to domestic currencies. As to Euro-denominated debt it is not hard to envisage a series of swap deals whereby it could be exchanged for the equivalent debt denominated in the local currency of the country of the issuer.

- The union survives with very limited fiscal union. Such as Euro-denominated bond issuances backed by the full faith and credit of some or all EU members who are also in the monetary union, to replace or stand behind the questionable debt of those peripheral countries currently targeted by the markets. This is tantamount to a sticking plaster on an open wound. It will succeed in 'kicking the can down the road' as the Americans would say but will not solve the inherent problem of discordant fiscal policy among member states. Lack of 'harmonization' if you will. And another crisis will one day result. Nonetheless I see this as the most likely outcome as it involves the path of least resistance for policy-makers, market participants and the public.