The eurozone is now enveloped in its first, full-blown crisis. The relentless rise in the euro against the dollar has made European exports increasingly expensive. In turn, this has accelerated the departure of manufacturing industry from Western Europe to countries where wage levels are lower. Indeed, we have seen this trend in Britain.

The eurozone is now enveloped in its first, full-blown crisis. The relentless rise in the euro against the dollar has made European exports increasingly expensive. In turn, this has accelerated the departure of manufacturing industry from Western Europe to countries where wage levels are lower. Indeed, we have seen this trend in Britain.

For instance, Samsung, the Korean electronics giant, announced recently that it is to close its Teesside manufacturing plant because of cheaper production costs in China. Now Germany believes it is in danger of becoming a bazaar economy in which exports remain strong but the component parts are bought in from the third world.

Partly as a consequence of such trends, the further risk for the eurozone as a whole is that unemployment rises to politically unacceptable levels. In such circumstances some countries, say Greece, Finland or even Spain, might have to consider leaving.

Currency battles are hard to fight at the best of times, but the eurozone is particularly ill-equipped. Unlike the US, China or Japan, whose governments decide exchange rate policy, the eurozone has only its central bank to speak up for it. Thus we know what American policy towards the dollar is - let it fall. Its weakness safeguards jobs in an election year.

China is clear, too. Resist a revaluation against the dollar and let exports flourish. One knows where one is with Japan. Intervene regularly in exchange markets to prevent the yen from appreciating. And eurozone policy? It is hard to say, though European central bankers and continental politicians have at last begun to speak about the dangers ahead.

In defending a currency, though, talk will only get you so far. The standard second stage is to manipulate interest rates, upwards if weakness needs to be countered, or down if the problem is undue strength. Unfortunately the European Central Bank has a bias against cutting its interest rate as its first duty is to fight inflation.

Finally, there is the weapon of intervention in foreign exchange markets in a manner which bruises speculators. This is best done when both sides of a currency equation act together, in this case the eurozone and the United States. I cannot see this happening.

The Americans are unlikely to view intervention as being in their own interests. So when finance ministers from the major eurozone countries together with their opposite numbers from Britain, Japan and the United States meet in Florida next month, I expect the US to argue that it is the failure of the European economies to deregulate faster that is the major threat to the eurozone economy.

Within the borders of the eurozone, structural weaknesses are beginning to show. Germany and France have so brazenly flouted the regulations limiting the size of budget deficits, the so-called stability pact, that the European Commission itself, the civil service which runs the European Union, is appealing to the European Court. Absurdly a court of law has been asked to rule on the tax and spend policies of sovereign states.

What is needed for a successful monetary union are substantial trading between member countries, labour and capital mobility and a method of directing welfare funds to the poorer regions out of the tax revenues of the richer parts - such as takes place automatically, say, between South-east England and the North-east. In the eurozone, none of these factors are present in sufficient strength. Trade between members accounts for only 15 per cent of economic activity. There is more labour mobility between the United Kingdom and the eurozone than there is within it.

While Britons retire to the Dordogne or the South of France to laze around in the sun, bright young French people pour into London for jobs. There are few comparable movements of working people within the eurozone itself. And the budget of the EU is too small to be effective.

In truth, the euro and the eurozone increasingly demonstrate what happens when a political ideal takes precedence over economic realities. It doesn't work. Is it a coincidence that the three countries that refused to join the eurozone, the United Kingdom, Sweden and Denmark, have had much greater economic success than members of the system?

Furthermore, I am beginning to wonder whether some countries won't be forced by public discontent to leave the club. The awful example of faraway Argentina and its link with the dollar shows what can happen. The exchange rate of the peso was rigidly fixed in terms of the dollar during the 1990s. In effect, this created a monetary union with the US. However, the conditions for a successful union were completely absent. As a result, the peso became vastly overvalued so that the Argentine economy collapsed, unemployment rose to unbearable levels, businesses folded, protesters took to the streets until finally the currency link was abandoned.

Yet still the Prime Minister, Tony Blair, dreams of taking Britain into the European monetary union. And certainly, changing my pounds into euros when I go to France and then back again when I return is a bother I could do without. But would it not be richly ironic if we started to prepare for entry just at the point when others were pulling out? That is the warning provided by the rumbling eurozone crisis.