There is also the US presidential election blame game; trigger-happy Washington's unfair-trade accusations against China, and Beijing's tricky footwork to avoid getting caught; and Japan's experiment with economic free fall by playing with tax increases without reforms.

Financial markets are spooked. Asian, European and US equity markets declined by 8 per cent, 7 per cent and 6 per cent respectively last month, and Asian markets fell again yesterday. Japan's Nikkei is at 21 per cent of its peak value of late 1989. Brent crude fell below US$100.

Probably the best indicator of how jittery investors have become is the sovereign bond market. Yields on UK gilts fell to record lows not seen in 300 years. Yields on US treasuries and other 'safe' government bonds also fell to all-time lows, just 1.45 per cent on benchmark US 10-year bonds.

The euro currency area is so far from being a single market that Spain is paying an unaffordable rate of almost 7 per cent on 10-year bonds, and Italy pays more than 6 per cent, while Germany is paying record low rates of a mere 1.13 per cent. Indeed, yields on the Schatz, Germany's two-year note, fell to minus 0.005 per cent, a negative yield, meaning that people were paying Germany for the privilege of parking their money there.

It was a good indication of plummeting confidence in the future of the euro and a growing expectation that soon there may not only be a new drachma as Greece leaves the euro, but a revived Deutsche Mark as the whole euro experiment collapses.

European leaders do nothing to dispel these ideas as they continue to bicker and fail to come to grips with reality. Italian Prime Minister Mario Monti spoke of his confidence of common euro zone bonds becoming a reality for the 17-nation EU - while German officials retorted that this would only happen over Chancellor Angela Merkel's dead body.

Berlin steadfastly adheres to what might be called the seven 'neins': no euro zone bonds; no deviation from austerity, including for Germany itself; no increase in the Euro500 billion (HK$4.7 trillion) funds available for the European Stability Mechanism; no common backing for the banking system; no relaxation of euro zone monetary policy; no monetary financing of governments; and no credit boom in Germany.

This is a dangerous game even if Berlin has decided that it is no longer prepared to pay the euro price. The Financial Times' Martin Wolf concluded that, 'The euro zone is now on a journey towards break-up that Germany shows little will to alter.'

But Berlin would do well to consider the damage that Germany risks bringing on itself. As Wolf noted, just 5 per cent of German exports go to China, whereas 42 per cent go to the euro zone. How much will survive a meltdown?

Last week on BBC Newsnight, Nobel economics laureate Paul Krugman said: 'I look at the European situation as, 'Something impossible is going to happen.' One is that the euro will be allowed to collapse, which is impossible; that's unthinkable.

'The other is that the Germans will accept lots of debt relief plus inflation, plus temporarily large open-ended lending, which is impossible - except one of those two impossible things is going to happen. So it's an awesome choice and they are not going to have years to dither over it.' But dither they do.

Unfortunately for everyone on the planet, the growing global economic maelstrom is no longer confined to Greece or the EU - a region that accounts for almost 30 per cent of global gross domestic product.

The US unemployment figures for May also make for grim reading. Economists were expecting 150,000 news jobs, and steady creation of 100,000 jobs a month is needed. But a mere 69,000 jobs were added, and the figures for March and April were revised down by 50,000, making the average gain for the past few months a meagre 96,000 jobs. The unemployment rate nudged up to 8.2 per cent.

There are more than 80 million Americans not counted in the workforce because they are not actively seeking jobs. On the basis of unemployed Americans who would take a job if offered one, most economists say that the true unemployment rate would be at least 10 per cent, and possibly higher than 12 per cent.

The implications reach wider than a sputtering economy and into politics, with growing speculation that Barack Obama may be a one-term US president. Polls indicate a tight race, and high unemployment does not testify to Obama's good management of the economy.

There is little prospect of a constructive American international approach to global problems, and a strong likelihood that between now and the November election, what passes for political debate in the US will deteriorate into a blame game.

Republican contender Mitt Romney claims that Obama has steered the US too close to European-style 'socialism', and Romney will try to shrink the state that imposes taxes on freedom and threatens enterprise. He also has little sympathy for an international view: Romney's hawkishness on China's trade and currency practices has indeed pushed Obama to take a tough line against Beijing's support for solar-panel makers.

Economists disagree over whether China is heading for a soft or hard landing and Beijing has given mixed signals on whether to try soft stimulus. It is certainly clear that China cannot rescue the world with another four trillion yuan (HK$4.54 trillion) package as in 2008.

If European implosion drags down the global economy and Romney pushes US austerity, the chances are that the world is in for a grim time because if everyone resorts to cost-cutting and austerity, it will lead to more debts, fewer jobs, shrinking demand, in a vicious cycle that could turn recession into global Depression, from which few countries would escape.

Euro1tr

Conservative estimates of the cost of Greece exiting the euro, while the cost of saving its economy is put at Euro10 billion