The strategy of fiscal consolidation and austerity in deficit countries has already created a self-reinforcing cycle of contraction in the eurozone, which is currently the most fragile part of the global economy.
As long as European leaders (and the IMF) continue to press for fiscal austerity, this will not just continue but get worse to the point where the current structure of the monetary union is no longer tenable.
The much-vaunted move towards greater fiscal integration, expressed in the latest EU summit in December, is still based on forcing counterproductive tight fiscal rules on member countries, which is a really bizarre thing to do in the midst of economic contraction, and can only make the situation worse.
The belief currently expressed by many economic commentators, that a 'big bazooka' in the form of even looser monetary policy of the European Central Bank, will be sufficient to lift economic activity, is unwarranted. So, it is not surprising that the vast majority of economists interviewed in a recent poll did not expect the eurozone in its current form to survive the coming year.
Meanwhile the process of its deterioration and possible disintegration will have fearsome effects on the rest of the world.
Already, declining demand from Europe has affected manufacturing exports from developing Asia both directly and indirectly.
It's foolhardy to hope that economic expansion in China, Brazil, Russia and some other countries will be enough to compensate for the slowdown in the advanced economies. In sheer quantitative terms, total incomes and import demand in these countries simply cannot counterbalance the falling net demand from US and Europe.
Image: One two euro dollar coin is seen on an identification sheet at an EU summit in Brussels.