EU runs out of patience, money and options

Greek Prime Minister Papendreou may have been writing his epitaph by calling a referendum on the bail-out package.

If so, he clearly knew how he wanted it to read. That, in the face of an imminent takeover of his country by foreign forces, he at least turned first to the people to allow democracy a final say before Greece as an independent nation was wiped out.

For this, I give Papendreou credit, even if such actions could spawn a progressive collapse of the euro, and an end to collective Europe as we know it.

We now learn, of course, that Papandreou's commitment was not as strong as it seemed. Or rather, that EU blackmail was stronger and - in the time-honoured tradition - a national referendum has been overruled by the EU in order to get the right result.

Given all this, I suggest even eurosceptics trembled somewhat at the potential outcome if Papandreou had been allowed his last stand. An ugly exit of Greece from the eurozone, without the calming effects of a managed withdrawal, would spook the markets no end.

Next in line for the battering ram would be the teetering financial walls of Spain and Italy. If the EU can't shore up these walls in the way it has attempted - but so far failed - in Greece, then they too will collapse. And the painful truth is, the EU cannot afford to prop up these countries.

The only possible salvation would be to turn to the international community. These days, that means not the US, as banker of last resort, but China, the world's new global banker.

It would be playful to consider China agreeing to help out Europe in return for each EU country regaining its WTO seat and Britain being handed back its fishing rights! However, any deal China cuts is likely to be far less sanguine than that.

It's ironic that Edward Heath, Britain's most fervent EUphile, was also one of China's most ardent supporters. For Heath, the world consisted of just three blocks - the US, the EU and China. Was it always his one-world plan that China should eventually rule the roost?

As the eurozone collapses, and the US buries itself under its own debts, only China now has the potential - or is that the threat - to sort out the world's financial mess.

Perhaps the greatest irony today, nevertheless, is that the first country the EU has destroyed by its over-centralising aims is the mother of European democracy itself. And, as such, a fitting EU target some sceptics might say.

Greece can regain its democracy - in a way - if it reinstates the drachma. But being in pawn to international bankers won't be a pleasant or a recognisable form of freedom. After its euro adventure, Greece could lie in ruins for another two decades.