The slowing European economy is receiving neither fiscal stabilisation nor monetary stimulus. Imposing punitive austerity measures and prolonged recession on countries with large deficits will not help them to address weaknesses in their economies. The real roots of the current crisis are therefore going unaddressed.

The decision, taken last month by the ratings agency Standard & Poor’s (S&P), to downgrade nine of the eurozone’s 17 member states was a humiliation for those nations. It was also a wake-up call—a reminder, if one were needed, that Britain cannot remain a passive spectator in this European crisis. There is an urgent need for Europe to check its pervading political disorganisation and sense of drift. Britain must play its part in this.

Almost half of our exports go to the euro area, and Britain’s banking system remains highly exposed to European credit risk. Uncertainty over the European situation is now adding to firms’