Just imagine it is this Thursday evening in the European Council’s gathering of Europe’s heads of state, and the Italian prime minister stands up and says this: “Mr President, dear colleagues. We are confronted with a simple choice: we can today either save the euro and build the foundation for a future political union, or we could flunk it and achieve neither. We all know what we need to do to save the euro. We require a banking union for Spain, a fiscal union for Italy and a political union for Germany.

“We can, of course, disagree on details. But we have to settle some of these differences this weekend, and take a decision on the steps that are needed right now. Our crisis resolution policies have failed time and again. We now need something that works fast. If we fail, I can assure you that I can no longer be part of this group, and my country can no longer be part of this project.”

Let me say first of all that I do not really expect Mario Monti to say such a thing, not even a more cryptic version. He is the leader of a technical government. His job is to fix things. Standing up to the German chancellor – grandstanding as some people might call it – let alone wagering Italy’s future is not part of his remit. Italy’s political parties appointed him because they needed a plumber to succeed the playboy, not a gambler. The last thing they wanted was a leader.

I believe there is a case for a calculated gamble. But its risks and pay-offs must be fully understood. The point is not so much to call Angela Merkel’s bluff, as some of my Italian and Spanish friends have been urging. She is not bluffing, despite the fact that a break-up of the eurozone would clearly be disastrous for Germany. Joschka Fischer, the former foreign minister, said recently that by allowing the eurozone to break up, Germany would for the third time in a century have inflicted utter devastation on Europe and on itself.

Those who advocate the strategy of calling Germany’s bluff often assume a degree of rationality that is plainly absent. The Germans have developed a strange narrative of the crisis. Following the debate there, as I do regularly, has a parallel universe feel about it. There is, for example, a denial that the current account surpluses are even remotely a factor. In the German narrative, the economy is like a football game, which Germany is winning. And the chancellor’s job is to support the team against another team – as she did in Gdansk last Friday when Germany beat Greece. Germany, like Ms Merkel, looks unstoppable.

European Council

Frenetic preparations for “last-chance summit”

With a few days left to run before 28 June, preparations for the Brussels European Council summit, which observers believe will be “decisive” for the future of euro, are well underway, as evidenced by the growing number of preliminary meetings that have brought together the major stakeholders.

In the wake of his participation in the Rome “mini-summit” attended by French, German, Spanish and Italian leaders on 22 June, François Hollande met with the European Central Bank President Mario Draghi on 25 June in Paris. According to La Stampa, the President of the European Central Bank was aiming to garner the French president’s support for a banking union and greater political integration. The daily also adds that the stakes are high for Draghi, because —

… if EU leaders do not agree to effective decisions at the 28-29 June summit, Mario Draghi is the one who will have to suffer the consequences.

And even if the markets are confident that Draghi will find a solution —

… further initiatives at the ECB have become increasingly difficult in a context where the Germans — who have been systematically in the minority in recent months — have developed a strategy of announcing their discontent outside the boardroom with a consequent loss of prestige for all involved.

On Wednesday, June 27, Hollande will host a meeting with Angela Merkel in Paris. As Les Echos notes, the divergence between the views of the two leaders remains “as pronounced as ever.”

The French business daily believes that “Hollande will be hoping to obtain concessions on the issue of solidarity from Angela Merkel, ”who continues to be hostile to plans for “an institutional leap forward”.

The French president is no longer insisting that eurobonds should be on the agenda for negotiation but he is counting on the Chancellor to accepts other forms of debt mutusalisation whether they be eurobills [short-term bonds], an amortisation fund for European debt, or allowing European bailout funds the option to purchase the bonds of eurozone countries in difficulty so as to circumvent the problem of soaring interest rates on sovereign debt.