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To get an idea of how the global financial crisis is testing the stability of the eurozone, look at the ever-widening spread between the yields on German and Italian 10-year government bonds: 25.8 basis points one year ago, 69.6 one month ago, 72.3 one week ago and 95.6 today.

With Greece the situation is even more acute: the spread between German and Greek bonds shot above 100 basis points last week for the first time since Greece adopted the euro in 2001. It is now close to 120 basis points. Portuguese, Spanish, Belgian and even Austrian and Dutch yield spreads are also wider than at any time since Europe’s monetary union started in 1999.

A widening spread means that investors judge it riskier to buy the debt of, say, Greece and Italy than the debt of Germany. Accordingly, they demand a higher premium.

For sure, it would be an exaggeration to say that spreads on today’s scale imply serious doubts among investors about the ability of Greece and Italy to honour their debts. But they do imply that investors lack full confidence in Greek and Italian fiscal policies.

They also serve as a reminder about the uncomfortably high levels of Greek and Italian public debt. Finally, they hint at a degree of uncertainty among investors about the cohesion of the 15-nation eurozone itself - namely, whether Greece and Italy are economically strong and fiscally disciplined enough to share the same currency with Germany over the long term.

This would not be an issue, of course, if the eurozone were like the US and had a central fiscal authority to transfer revenues between flourishing states and states suffering an economic shock. But you cannot have a central fiscal authority without a much greater shift in the direction of European political union than most politicians, taxpayers and voters appear ready to contemplate.

Even appeals for closer co-ordination of macroeconomic policies among eurozone governments meet resistance. This was was seen last week in the response to President Nicolas Sarkozy’s call for new and stronger arrangements for joint policymaking in the euro area.

Sarkozy’s proposal had its flaws and, in any case, such appeals coming from France are always liable to be interpreted as an attempt to place the European Central Bank under political control. Nonetheless, Sarkozy put his finger on the problem.

The global financial crisis is beginning to test Europe’s ability to operate a multinational monetary union without closer political and institutional integration. Since 1999, Europe has had its cake and eaten it: the pleasure of a single currency that symbolises European unity, without the pain of a political union unpalatable to so many of its policymakers and citizens.

But as the bond yield spreads show, if the financial crisis gets any worse, Europe will find itself facing some extremely difficult choices.

As the Asian financial crisis deepened in 1997, the then Japanese prime minister Ryutaro Hashimoto made the memorable remark: “Japan cannot save Asia, it can only save itself.”

Until Sunday, it looked as if most of the European Union’s national leaders were falling over themselves to take a leaf out of Hashimoto’s book.

Unilateral steps on everything from deposit guarantee schemes to emergency bank bail-outs were the order of the day. Government ministers were also falling prey to the temptation of diverting voters’ attention to issues, such as excessive pay for bank executives, that had no relevance to overcoming the immediate crisis.

Now a more comprehensive plan is in place, focusing on the right questions - the vulnerability of many of Europe’s internationally active banks because of their high leverage; the intricate interdependence of these and other Europe-based banks; and the need to restart interbank lending.

Once the storm swept into Europe in September, recapitalisation of the banking sector through the injection of public equity was always going to be part of the answer to Europe’s financial crisis. That was clear to anyone familiar with the situation of European banks over at least the past five years.

Even in good times they had, on aggregrate, lower profits and lower interest margins than their US counterparts. Consequently, as a team of analysts at Citigroup noted in late September, the European banks had less of “a cushion to absorb the strains and losses” of a full-blown crisis in the financial markets.

The problem during the past month hasn’t been a lack of understanding of what caused the financial crisis and how to tackle the European end of it. It has been a lack of courage in political circles, in particular to take measures that may involve acting on a pan-European scale. This explains the haste with which German officials shot down a French- and Dutch-inspired idea for a common EU bank bail-out fund.

Even now, what we’re looking at is a bundle of co-ordinated national plans to rescue the banking system. Conveniently for governments that have never exactly shone at balancing their budgets, we’re also looking at the slide into irrelevance for years to come of the EU’s fiscal rules, enshrined in the Stability and Growth Pact.

The emergency measures may work, but it is by no means clear that Europeans have yet cured themselves of the Hashimoto habit.

The times are so alarming that sometimes all you can do is laugh. Consider Fortis, the large Belgian-Dutch bank and insurance company, which this week became Europe’s biggest casualty so far of the world financial turmoil.

Only a few months ago it launched a new advertising campaign.  It was a nice catchy slogan, too. ”Here today. Where tomorrow?”

Where indeed? As self-fulfilling prophecies go, this was right up there with the Oedipus legend.

Yet the slogan also brings to mind what many Belgians and other people see as the grievous condition of Belgium itself. The Belgian state is here today, as it has been for the past 177 years, but where will it be tomorrow?

The gulf between the prosperous, Dutch-speaking northern region of Flanders and the less prosperous, French-speaking southern region of Wallonia is so wide that, apart from Bosnia-Herzegovina, Belgium must be classified these days as Europe’s most internally divided country.

Belgium has been in almost total political paralysis since a general election in June 2007, with Flemish and Walloon parties unable to agree a deal on more autonomy for the regions. Only a week before Fortis was bailed out, Prime Minister Yves Leterme’s government was brought to its knees when a Flemish nationalist party withdrew its support.

Yet this is by no means the whole story. Perhaps the most important lesson from the Fortis drama is that, when the chips were down, the Belgian government and Belgian regulators were able to co-ordinate a rapid emergency intervention to save the company.

It wasn’t other banks or the private sector that rescued Fortis. It wasn’t Flanders and it wasn’t Wallonia. It was, together with the Netherlands and Luxembourg, the much-maligned Belgian state. Two days later, the Belgian state helped shore up the finances of Dexia, the Franco-Belgian financial services group.

No wonder Leterme was confident enough to appear on Belgian TV on Tuesday evening and say pointedly that, “as a new shareholder” in Fortis, the Belgian government would not be happy if the bank awarded a €4m-5m payoff to Herman Verwilst, the former chief executive.

So, three cheers for Belgium - and a loud raspberry for the people who dreamed up Fortis’s advertising campaign!

How many lessons do European Union policymakers need before they rid themselves of the illusion that Europe’s economy and financial system are to a considerable extent “decoupled” from those of the US?

In six EU countries - the Benelux trio, Denmark, Germany and the UK - we have seen emergency state intervention over the past few days to rescue or nationalise collapsing banks and mortgage lenders. In each case, the action would not have been necessary had it not been for the financial upheavals in the US.

Yet for most of September, EU finance ministers and other high-ranking officials were at pains to assure us that Europe would be only mildly exposed to any financial contagion emanating from the US.

It wasn’t true then, and it certainly isn’t true now. According to the International monetary Fund, European banks’ aggregate exposure to US subprime mortgages is roughly 73 per cent of the exposure of US banks. Moreover many European banks have become highly leveraged in recent years, leaving themselves with few escape routes when credit conditions tighten and they face unexpected losses and writedowns.

But this is not the first example of European complacency. Last January and February, EU policymakers - such as Jean-Claude Juncker,  head of the eurozone’s finance ministers’ group, and Joaquín Almunia, the EU monetary affairs commissioner - loftily dismissed suggestions that Europe’s economy might fall into serious trouble as a result of the US downturn. Europe was more self-sufficient, pursued better balanced policies and was more resilient, was the message.

Less than a year later, the major European economies - France, Germany, Italy, Spain and the UK - are all either in recession or on the brink. Between April and June, the eurozone suffered its first quarter-on-quarter contraction of GDP since the euro’s launch in 1999.

One can sympathise with the yearning of European policymakers to be “decoupled” from the US, in an economic sense. They see it as an affirmation of independence and the basis for a firmer European identity in the future. Some policymakers even seem to speak quite deliberately in terms that put political goals first and economic reality second.

But now reality is hitting the EU hard on the head. The attractions of wishful thinking have never seemed less persuasive.