Eurozone economy: G20, UK and US pressure on EU
Chancellor George Osborne says the eurozone's sovereign debt crisis "remains the epicentre of the world's current problems."
His Washington counterpart, US Treasury Secretary Tim Geithner, has warned that unless the eurozone sorts its problems out pronto the world faces "cascading default, bank runs and catastrophic risk."
Whether we are all heading for the knackers' yard or with one bound will be free will be determined over the next three weeks - 21 days that will determine the future of the world. So that's worth a countdown.
G20 finance ministers met in Paris this weekend. They left with eurozone ministers promising to come up with a comprehensive plan to recapitalise eurozone banks, resolve the Greek debt crisis and increase bail out funds in time for the EU summit next Sunday (2 October). The G20 was encouraged by this promise - but it's a tall and expensive order.
The recapitalising of the banks, to keep them solvent in anticipation of a sovereign debt write-down, will cost around £200bn. Some of that will be raised by the banks from private investors, more from national governments and a large chunk from the EU.
End Quote Andrew Neil BBC Daily Politics presenter
Fasten your seat belts - we are in for a rollercoaster ride in the coming three weeks”
The banks need to recapitalise because they've got so much sovereign debt on their balance sheets that they've loaned to countries who will not be able to pay it all back.
The eurozone will at last accept the inevitable that Greece cannot repay all its debt and accept a Greek default of at least 50% and maybe even as much as 70% (which would be more realistic).
The French will try to fudge what is happening - but it will amount to a default. What is not clear is whether the plan will also get Portuguese (and even Irish) creditors to take a haircut too.
The eurozone has always shied away from the inevitable Greek default because of fear of contagion.
The third part of the rescue plan: a bail out fund of £2 trillion or more to help with the recapitalisation and to keep the bond and money markets liquid so that banks continue to lend to each other despite the financial turmoil.
The European Financial Stability Fund (EFSF) already has almost £500bn at its disposal. The trick is to leverage that to £2 trillion without the German taxpayers thinking they are up for an even bigger bail out bill. A big trick.
The eurozone is supposed to agree all this in time for the EU summit next weekend, when all Europe's leaders will be there. If it does, the G20 is indicating that the IMF will step up to the crease with increased financial firepower of its own.
The EU summit is meant to endorse it all in time for the G20 summit in Cannes on 3/4 November.
Chancellor Osborne told me at the Tory conference that the G20 summit was the end game for the eurozone sovereign debt crisis: there had to be a credible plan on the table by then or the markets would take matters into their own hands.
By that, I take him to mean that the wholesale money markets would dry up, financial institutions would stop lending to each other (because they doubted their solvency) and a liquidity crisis would produce the mother of all banking crisis, throwing Europe and the US into a deep recession, as they struggle to emerge from the last one.
Big stakes indeed. Frankly, for the next three weeks it's the only story that matters.
The precarious state of the UK economy to weather such a crisis is illustrated by the latest forecast from Ernst & Young (E&Y), which uses the same computer model of the economy as the Treasury.
It's predicting less than 1% growth for this year and only 1.5% for 2012. Even by 2013 it thinks the economy will only manage 2.5%. E&Y says it's surprised by the weakness of business investment and exports. But if they are weak at a time when consumers are tightening their belts and the government is cutting spending (in real terms) then it's hard to see where growth could come from.
Growth that anaemic has two clear consequences: unemployment will continue to rise and public borrowing will be much higher than the government assumes in its deficit reduction plans.
So you can see how the UK economy is in no position to withstand a eurozone firestorm, which is why the coalition sees the sovereign debt crisis as by far the biggest threat to the country's well-being.
So fasten your seat belts. We are in for a rollercoaster ride in the coming three weeks.