LONDON (MarketWatch) — Which euro-zone country is most deeply in debt? The profligate Greeks, with their generous state-funded pensions? The Cypriots and their banks stuffed with dodgy Russian money? The recession-hit Spaniards or the boom-and-bust Irish?

None of the above. Actually, it is the sober, responsible Dutch.

Consumer debt in the Netherlands has hit 250% of available income, one of the highest levels in the world. In Spain, by comparison, it has never gone above 125%.

MarketWatch

The Netherlands has turned into one of the most heavily indebted countries in the world. It has slumped into recession and shows very little sign of coming out of it. The euro crisis has been dragging on for three years now but so far has only infected the peripheral nations within the single currency. But the Netherlands is a core member of both the euro and the European Union. If it can’t survive in the euro zone, then the game really will be up.

Holland has always been one of the most prosperous and stable nations with Europe — and one of the most pro-EU. It was a founding member of the union, and it was among the most enthusiastic supporters of the launch of the single currency. With a rich, export-oriented economy, and plenty of successful multinational companies, it had much to gain, one would suppose, from the creation of the single economy that was meant to come into being once the euro was successfully launched.

But instead it has started to play out a depressingly familiar script. It is blowing up in exactly the same way that Ireland, Greece and Portugal did — except on a slightly longer fuse.

Low interest rates, set mainly to benefit the German economy, and lots of cheap capital led to a property boom and an explosion of debt. From the launch of the single currency to the peak of the market, Dutch house prices doubled, making it one of the most overheated markets in the world.

Europe house of the week: London triplex

Now that has crashed spectacularly. House prices are falling as fast as they did in Florida when the American housing boom turned sour. Prices are now 16.6% lower than they were at the peak of the bubble in 2008. The National Association of Estate Agents predicts another 7% drop this year. Unless you bought your home back in the last century, it will now be worth less than you paid for it — and even worse, probably less than you borrowed on it as well.

As a result, the Dutch are now sinking under a tide of debt. At more than 250%, household debt is even higher than in Ireland and 2 ½ times the level in Greece. Already one bank was rescued by the government, and with house prices still collapsing there may well be more to come. The Dutch banks have 650 billion euros outstanding on real estate that is rapidly falling in value — and if there is one thing we know for sure about the financial markets it is that when the property markets collapse, the financial system is not far behind.

The credit-rating agencies — not usually the first organizations to catch up with events — have started to take notice. In February, Fitch cut the stable rating it had on the Netherlands’ debt. The country is still triple-A rated but only by the skin of its teeth. The agency pinned the blame on falling house prices, rising government debt and doubts about the stability of the banking system — the same toxic mix familiar from other crisis-hit euro-zone nations.

The economy has now sunk into recession.

Unemployment is rising and hitting two-decade highs. The jobless total has doubled in just two years, and in March alone it went from 7.7% to 8.1% — a faster rate of increase than even in Cyprus. The IMF predicts that the economy will shrink by 0.5% in 2013, but those projections have a nasty habit of being too optimistic.

The government is missing its deficit targets, despite imposing deep austerity measures as recently as last October. Just like other euro-zone countries, Holland now seems locked into a vicious cycle of rising unemployment and declining tax revenues, leading to yet more austerity — and even more cuts and unemployment. Once a country gets set on that track, it is very hard to get out of it again — and certainly not within the confines of the euro.

Up until now, the Netherlands has been Germany’s key ally in imposing austerity across the continent as the answer to the currency’s problems. But as the slump worsens, Dutch support for an endless diet of cuts and recession — and perhaps the euro itself — will start to evaporate.

The other collapses in the euro zone have been on the periphery of the currency. They have been marginal nations, and their problems could be presented as an accident, rather than as exposing systemic flaws in the way the currency was put together.

The Greeks spent too much money. The Irish allowed their property market to run out of control. The Italians always had too much debt in the first place. But there can’t be any excuses for the Netherlands: It obeyed all the rules.

It has always been clear that the euro crisis would reach its terminal phase when it reached the core. Many analysts assumed that would mean France. And yet, while France is hardly short of problems (unemployment is rising relentlessly, and the government is doing everything it can possibly think of to make the economy less competitive), it is still a wealthy country. Its debts may be high, but they have not yet spun out of control or started to threaten the stability of the banking system.

The Netherlands is starting to reach that point. It may take another year, perhaps two. But the slump is gathering in pace, and the financial system looks less stable by the day. In fact, Holland will be the core country that goes bust first — and that will be a crisis too far for the euro.