A survival strategy for the Eurozone

There are three possible scenarios: 'muddle through', based on the current approach of 'lend and pray'; 'break-up', with disorderly debt restructurings and possible exit of weaker members; and 'greater integration', implying some form of fiscal union.

The muddle-through scenario with financing provided to member states in distress (conditional on fiscal adjustment and structural reforms), in the hope that they are illiquid but solvent is an unstable disequilibrium.