The real European crisis still hasn't begun, but it will soon

The original meaning of the word 'crisis', dating back to the time of classical Greece, is the turning point of a disease, when the patient either begins to recover or sickens and dies.

In that sense, the euro zone isn't yet in crisis. There are signs, however, that the financial and economic sickness that has afflicted the countries of Europe's single currency for the last 21/2 years may well soon reach its turning point, either for better or worse.

Firstly, fears over Greece's continued membership of the euro are intensifying once again. The representatives of the troika - the European Commission, the European Central Bank (ECB) and the International Monetary Fund - currently in Athens to review Greece's progress are certain to find the government has failed to meet the deficit reduction targets set out in its bailout package.

That's thrown the next tranche of bailout funds, due to be disbursed in September, into doubt. However, some observers believe the crunch could come as soon as next month when the Greek government is due to repay a Euro3 billion (HK$28.17 billion) bond.

Either way, analysts at Citigroup now say it is 90 per cent certain Greece will leave the euro, most likely by early next year.

Next there is Spain, where the European authorities' pledge last week of a Euro100 billion loan to recapitalise the country's banks only focused market attention on the government's own debt levels, forcing Madrid's borrowing costs up to an unsustainable 7.6 per cent.