David Prosser: Fiddling while Rome burns: the eurozone isrunning out of time

Outlook The eurozone's sovereign debt crisis has now been going on so long, people could be forgiven for thinking of the boy who cried wolf each time a new chapter begins. The way events unfolded in Italy yesterday might appear to reinforce such a view. Europe's stock markets opened sharply down and there was a race to safe-haven assets, only for a recovery to begin once the Italian government made it clear that rumours it had struggled to get a bond auction away were completely untrue.

Crisis averted? Well, in the very short term, yes. Italy has the financing it needs. The euro lives to fight another day.

Do not make the mistake of thinking, however, that the eurozone's slide towards the abyss has been arrested. It has not.

Ask RAC, for example, the roadside recovery service that Carlyle Group, the private equity concern, is in the process of buying from Aviva for £1bn. The bond issue necessary to support this deal was launched yesterday, just as Europe's high-yield market froze completely – for the first time since the credit crunch.

Or ask investors in Italian sovereign debt, on which the yields rose above 6 per cent at one stage yesterday, the highest level for more than a decade. In Greece, Portugal and Ireland, 7 per cent proved to the tipping point – the level at which investors decided they were no longer prepared to invest in these countries' bonds.

Alternatively, take a look at the hysteria at the European Commission, where internal market and services commissioner Michel Barnier is now considering trying to prevent the credit ratings agencies proffering opinions on the creditworthiness of countries that are in a bailout programme. Mr Barnier seems to think the best way to address concerns about Europe's efforts to restructure indebted nations' finances is to tell those raising them to shut up.

The question now is whether the eurozone's members care enough about the single currency to nip this crisis in the bud before it engulfs them completely. That sounds deceptively simply, yet at every stage of this long and painful process, there has been a failure to accept the difficult realities of the situation.

That failure continues to this day: after weeks of kicking and screaming, European leaders at last conceded on Monday night something that everyone else has been acknowledging for months now; that it is inevitable Greece will default on its debts. Yet they still cannot agree on how to manage what policymakers benignly describe as a "credit event".

At the risk of being rather tooliteral with the metaphors, this is fiddling while Rome burns. If the eurozone cannot agree on aconvincing solution for the woes in Greece – comparative small-fry in this saga – why should anyone believe it will not allow "too-big-to-fail" Italy to do exactly that?