Just in case our last couple of posts are misinterpreted as another case of impecunious Brits taking jealous pleasure at the impoverishment of our once-wealthy American cousins, let us make it clear that we have a much bigger problem on our own doorstep.

The American problem is that recovery is too slow, but there is still recovery and the worst of the crisis is probably past, at least for the time being. The European Union, on the other hand, has not really addressed its deeper structural problem, and is therefore a crisis waiting to happen.

In fairness, the euro, the common currency of most EU states, is a symptom, rather than the cause, of this problem. There was always a hole in the deal: the euro is only as strong as its weakest economy. In particular, lax fiscal discipline on the part of a single Eurozone government undermines the whole currency. The mechanisms for imposing discipline were weak from the beginning, but everyone ignored them when times were good.

That is no longer an option. The party is over and the bill has just been presented. The EU, however, has even less leadership than the USA. The European response to the inability of overindulged states like Greece, Spain, and Ireland to pay what they owe has been described, elegantly but all too accurately, as “agreeing a funding mechanism but not funding it”.

Nationalised banks in Ireland are bust. This in turn puts pressure on the sovereign debt of the Irish government. Much of that debt forms a key part of the balance sheets of foreign banks – not least in Britain, which may therefore suffer despite the UK not being a Eurozone member.

This could impact on the whole economy. The equity market, still a little too bullish under the circumstances, may be in denial, but the rising price of gold suggests a lot of the smart money is playing it safe in anticipation of another crash.

Meanwhile, across the Atlantic, the Americans have some right to feel smug. The first phase of the infamous Troubled Asset Relief Programme – that is to say the initial bail out of the banks, as opposed to the later unnecessary “stimulus packages” – has been a qualified success. Buying up toxic assets, as opposed to nationalising banks, means the government has been able to get away with a quick “in and out”, with no longer term commitments on either side. Most of the American banks repaid the government very quickly in order to get it out of their hair, and stability was restored to the US banking system within months. Those who still carp about it can see the alternative in Ireland.