John Redwood MP puts it tersely:

Its first task, as stern budget superviser urging member states to rein in deficits, should be to make dramatic reductions in the EU budget. From each member states point of view the money spent on EU matters and projects is of more marginal importance than say the money spent on domestic education and health care.

The EU should take the lead to in cutting spending to relieve the budgetary pressures. Spending cuts should start abroad. The EU’s sensible requirement for controlled budget deficits should make them lead by example.

Its second task should be to draw up a big Repeal Directive, removing from the law codes many of those fiddling and costly interventions in business life which have led to the export of so many jobs from the EU to less regulated places like China and India…

Indeed.

As I keep intoning, the only heavy leverage the UK has in EU processes is money – our money.

So the forthcoming EU Budget round is going to be existentially important for both the UK and the EU.

Will the UK government have the steely resolve needed to press for massive cuts in the EU Budget (and to some extent EU functions)? Or not?

It will be impossible to persuade hard-pressed UK voters aghast at cuts in public spending here that it makes sense to pour taxpayers’ money into un-cut EU spending.

This could be a fine area for an iron London/Berlin alliance. Germans are dismayed at the turn of events in the Eurozone, and should be open to British ideas for Discipline.

Meanwhile others are insisting that as the Eurozone enters swampy ground, the only policy is to tie even more tightly together not only Eurozone members but all EU members. If one sinks, all sink:

If a country joins the euro area, it shares a common destiny with the other members. There is a need for a quantum leap in the governance of the euro area.

It is hard to see all this going far without changes to EU treaties, and all the new political drama (including in the UK) which that will bring.

John Mauldin’s latest newsletter (free, but you need to sign up for them – well worth it) has doubts:

Europe is run by Keynesians (as is the US). They see everything as a liquidity problem. And sometimes it is.

But the PIIGS have a debt problem. And you don’t cure a debt problem with more debt unless you have a clear path to grow your way out of the debt. But as I have demonstrated, there is no clear path to growth with the current policies. They will produce deflationary recessions, lower government tax receipts from reduced GDP, and higher unemployment…

This is just the beginning of their woes. They have a long way to go and a short time to get there. Can it be done? Yes, of course.

But it is going to require a great deal of change. I hope they pull it off, I really do. I have been to most of Europe and love every bit I have seen. The world is better off with a united Europe.

That being said, I have my doubts that the European Union in its current form will exist in 5-7 years. I hope I am wrong…

I tend to think that he’s correct – that the EU as currently configured can not survive much longer. If only because the measures needed to make the Eurozone work will compel new levels of ‘integration’ for all EU members which will go well beyond what some countries can accept.

Things are already coming to a head, via Qualified Majority Voting.

Under EU rules decisions in many policy areas and binding on all can be taken by votes of EU member governments. Hitherto voting has not been a decisive factor, since EU member governments mull things over, look at the weight of likely opposition to see if any combination might have a blocking minority, and cut deals.

So there is voting but it in effect usually defines a different way to reach a consensus.

What we can expect soon are proposals put forward for voting which are said to be essential for Eurozone members as such, but may well have negative outcomes for non-Eurozone members. The Eurozone members may then start to push through those votes in the face of outright opposition from many of the others – but especially the UK.

If that starts to happen systematically, the implicit deal based primarily upon a sense of consensus will have been changed irrevocably in favour of majority-led power-plays. The legitimacy of that sort of decision-making and its outcomes will fall to be challenged very hard.

So there has to be a good chance that the result is the emergence of some sort of formalised new arrangements, maybe two or more smaller European unions.

In one group, those countries which are ready to stop being countries and form a new bloc phenomenon, with one currency and the inflexible fiscal, popular voting and other mechanisms needed to make that happen.

And in another, countries which are satisfied with looser and more flexible cooperative arrangements.

Anything really wrong with that, as long as the two groups live nicely together and don’t fight?

Not really. But the transaction costs and associated convulsions will be considerable. Which group Germany would now join?

Maybe those convulsions, huge as they must be, are preferable to standing in a swamp watching the slime-level inexorably head north above our knees, no-one able to move because we are all tied together?