I've always liked the idea. The only reason they went backwards instead of forming a government is because of the nature of each European countries' attitude towards each other. The easiest move towards union was diplomatic, then it was economic, and finally (maybe eventually) political.

Sure, it's flawed (And now painful), but I believe there are too many interests resting on the Euro for it to fall. If there's such a thing as too big to fail, then the E.U. is probably it.

Don't forget the euro is still stronger than the US dollar

It's really up to the Greek at this point. Either they start realising they can't just have it all without giving a bit too, or they don't and choose to go on without Europe. In the latter case, we all have problems, but it would be interesting to see what happens when Greece goes bankrupt. It might not be such a bad thing: Greece disbands, sheds all its debts and starts over new. In a chain reaction most other European countries will go bankrupt, shedding all their debts and starting over with a new government. All banks will go bankrupt, and everyone will loose all their savings.
This might result in a lot of non-European banks and countries going bankrupt.

In the end, I'm not sure that's really a bad thing. Just reset the global economy and start over. For the majority of the world population, that's actually a good thing. Only those with lots of money have lots to loose.
Personally, I'm in favour of hyperinflation, since I have more debts than savings at the moment.

An alternative is to sell Greece to China .
Which is actually the biggest worry: the collapse of Europe on its own is not really a problem, but we have to avoid that the Chinese (or others) buy our land and infrastructure.

If anyone was too big to fail it was the Roman Empire.
They failed.
Do we learn nothing from this?

Seeing as the Roman empire fell because its' economy was based on the assumption that they would always be able to expand outward to aquire new slaves, leading to the economy crumbling when they stopped expanding... I'd say that's not exactly an apt comparison Silver.

Well given that most current economies rely on constant growth to outrun the debt it's sounding pretty close to me. We're beginning to see what can happen when growth stalls.

Anyone who believes in too big too fail should reference not only the roman Empire, but dinosaurs, teh square cube law, and Elvis Presley. It is a myth that anything can be too big to fail- in time everything fails, and being big just makes the failure that much more catastrophic.

Imposed how? Greek is a sovereign nation. If they want to borrow and people want to lend that's always going to occur. There is only a problem when they want/need to borrow and nobody is in line to hand them cash anymore. Now since they don't have control over printing their own currency they can't use that way to destroy their economy and have to think up brand new innovative ways to it instead.

Here's an interesting question- how does it impact the rest of the EU if Greece defaults on it's loans?

Exactly. The Euro was an obvious precursor to a greater union, therefore, restricting the amount of debt a country can run up as a part of such seems a reasonable proposition. Yes, Greece is a sovereign nation (kind of, given their EU status and Eurozone status). They are also part of a broader federation relying on them to not screw up, which they did. As a result, it screws up the whole federation. Therefore, said federation needs greater restrictions on its members to prevent similar screw-ups.

The problem isn't just Greece, it's Germany.

Fiscal union would resolve many of Greece's problems. Debt would be shared with the other European countries, the credit rating would be better and interest rates on debt would decrease.

However it would be bad for Germany. It would have to shoulder a share of the debt of other European countries, the credit rating would be worse and interest rates on debt increase.

That is why Germany is resisting any moves towards closer fiscal union, including European bonds.

However Germany also doesn't want Greece to leave the Euro. If it did a cascade effect is highly likely, leading to the dissolution of the Euro. Germany would revert to the Mark and the subsequent adjustment in exchange rates would wipe out the competitive advantage they have enjoyed from being part of a joint currency.

Short-sighted government profligacy was a problem, particularly in Greece who suddenly found themselves with a much better credit rating and cheaper debt when they joined the Euro. But you can understand the temptation. People vote for the party that promises to cut taxes and increase services and they don't worry about where the money comes from until it disappears.

Also don't forget that the current mess is the end result of malpractice by American financial companies which Greece had no influence over. No amount of European legislation would have prevented it.