The problems that currently dog the euro zone countries can be traced back to the end of the Cold War two decades ago, a period when, paradoxically, Europe seemed to be at the height of its powers.
It was then that the European Union embarked on its most audacious project: the creation of the euro as its single currency. Some experts warned that no monetary union can succeed unless national economies approach a similar level of development and spending priorities are decided centrally, rather than in each state.
But the Europeans ignored such warnings because at the time, their economies were growing, the Soviet Union was defeated and the former communist countries of Eastern Europe were rushing to copy the West's economic and political model.
The result, however, is today's disaster.
What went wrong? A currency designed for an economic powerhouse such as Germany was also adopted by Greece, whose exports are less than a tenth those of Singapore's.
According to European treaties, governments were required to watch their finances and not borrow more than they could afford. But the restrictions were simply ignored. In the past, governments of weaker and poorer European states had to pay higher interest when they borrowed. But once everyone in Europe had the euro, they could all borrow at the cheap interest rates which previously only a country like Germany enjoyed.
Debt piled up as it became easier for politicians in poorer countries to borrow money in order to offer their voters new social benefits than it was to tax their people to pay for these spending promises.
Yet the game had to stop at some point and it did, once it became clear that some countries were simply unable even to keep up with the repayments on their loans, since their total debt was higher than the value of their entire economy. By 2010, for instance, Greek debt stood at 120 per cent of the country's gross domestic product (GDP). In effect, the country was bankrupt.
Others such as Portugal, Ireland and Spain too ran into debt problems. They were ultimately bailed out, but only in return for agreeing to apply severe austerity measures. The Greek economy has fallen by an average of 5 per cent for the past four years. Unemployment in Spain stands at 23 per cent of the population.
Nor is this all, for Europe's long-term economic competitiveness is being destroyed by an over-valued currency as well. For example, since Italy adopted the euro, its effective exchange rate - based on its labour costs - rose by 26 per cent. The only way this disparity can be addressed is by either devaluing the currency, or by depressing the salaries of workers, a method which economists call "internal devaluation".
The first option is not available, since the euro is controlled by a bank beyond the influence of any government. And the second option is equally impossible, since workers will not tolerate a huge drop in their earning power.
Getting out of Europe's monetary union is not an option either. According to the most optimistic calculations, an exit from the euro could cost Italy about 10 per cent of its GDP and it will need about 25 years of uninterrupted growth to merely recover from this loss.