Writing in today’s FT, Munchau explains why he believes the Eurzone is running out of options:

Merkel and the ECB can’t agree on a permanent response to the crisis. Meanwhile, last week’s ruling by the German constitutional court on the European Financial Adjustment Facility, the crisis mechanism to bail-out Greece, Portugal and Ireland, “categorically rules out any policy option beyond what has been agreed so far”. The 29 page ruling, which Munchau has read, prevents the German government from signing up to permanent mechanisms, apparently including a Eurobond, and a fiscal union. The latter would require a German referendum which is bound to reject a transfer of sovereignty to Brussels.

Germany’s political leaders are now stuck, and will react more slowly to the next crisis. Munchau worries that this makes a systematic accident, leading to a default by one of the Eurozone members “very likely to happen at some point”.