Can the euro survive another year? The obstacles to such solutions are as daunting as ever. According to the last IMF Fiscal Monitor, euro area governments have €1.6 trillion of debt to issue over the coming year, and that's on the heroic assumption that deficit reduction targets are met. The eurozone banking sector faces a similar funding cliff, with €500bn of new market funding to find by the end of the year and not much less the year after. Joint Eurobonds would certainly resolve the problem, temporarily at least, but there is no possibility of such debt mutualisation being agreed any time soon. Nor does there appear much chance of the European Financial Stability Facility being expanded to a size that would underwrite Italy and Spain. If this is to be another year of muddling through, much of the remedial action must therefore come from the ECB. The politicians have shown themselves consistently too slow and constrained to cope with the crisis. On the evidence of Monday's Merkozy press conference, they still prefer the diversion of imposing a Tobin tax to confronting the crisis. The dishonesty is breathtaking - if we tax the speculators in the City of London, they seem to be saying to their voters, all our problems will be over. No, there's little help coming from this quarter. The ECB finds itself on thin ice, too. Already, it has a larger balance sheet as a proportion of GDP than either the US Federal Reserve or the Bank of England. What's more, the composition of this balance sheet, stuffed to the gunnels with dodgy sovereign debt, and increasingly, even dodgier banking assets, is plainly much higher risk. With its gilt-buying programme, the Bank of England can be virtually certain of getting its money back. The same is not true of the ECB, which already has to reconcile itself to writedowns on its holding of Greek sovereign bonds. All the same, it's hard to see alternatives to yet further ECB balance sheet expansion. The bank's president, Mario Draghi, has already promised the banking system unlimited liquidity. Might he go further and promise it to governments too? As the official policy rate approaches zero, he'll be under ever greater pressure to act. Germany was over-ruled in its objections to the purchase of periphery economy bonds, and as the deflationary threat grows, it will eventually be over ruled on wider-ranging quantitative easing, too. Central banks like to pretend that such support is all about demand management, and really has very little to do with printing money to fund governments. Most observers, reasonably, find it hard to see the distinction. Half the value of debt issued by the UK debt management office since the start of 2009 has been hoovered up in secondary markets by the Bank of England. Even the Bank admits that the effect has been to depress gilt yields by a full percentage point. It is little wonder that the eurozone periphery looks at what is happening in Britain and the US, and asks in exasperation why the ECB cannot do the same for Europe. Fear of the consequences of a disorderly break up of the single currency, together with blinkered political commitment to monetary union, seem to make it inevitable that the ECB will eventually give in. Nobody knows what the consequences of break-up might be, but most analysis - including the genuinely impartial stuff alongside the self-serving analysis from single currency supporters - suggests a very ugly outcome. Even assuming the euro struggles on, Goldman Sachs is forecasting zero growth for the eurozone in the next two years, and much, much worse if it doesn't. Study of BIS data by investment bank Jefferies International confirms that at the end of June 2011 German banks had €1.1 trillion of total exposure to the rest of the euro area, and French banks €1.3 trillion. Bundesbank data further confirms that excluding banks, German enterprises had €421.9bn of total assets in the rest of euro, as well as €545.8bn of total liabilities. The contractual losses around any act of currency default would be extreme, and assuming a wide scale return to national currencies, enough annihilate trade for some time. We won't know for sure whether the single currency will keep on muddling through until eurozone policymakers face up to their predicament - that sustaining the euro requires more or less indefinite transfers of money from richer to poorer regions. That's the reason Germans are so opposed to ECB bond purchases, for such buying is in essence as much a form of liability transfer between governments as outright eurobonds. As long as policymakers keep burying their heads in the sand of Tobin taxes and other such diversions, this underlying choice goes unaddressed.