In the early Sixties, Hugh Gaitskell's leadership of the Labour party was often under threat (he would have cut up into twenty Ed Milibands, but there you are). Harold Wilson was regularly accused of stoking the furnaces of conspiracy at the time. At a Labour conference, he was once joshing with a few journalists who were teasing him on that very subject when Gaitskell hove into view. Gesturing with his pipe in his leader's direction, Wilson said: "If he is ever found with a dozen daggers between his shoulder-blades, I will be able to prove that at the time of the homicide, I was dining with twelve police officers, none of them below the rank of Superintendent".

For Wilson and Gaitskell, read David Cameron and George Osborne on the Euro. I suspect – and this is pure speculation – that in pectore, the Prime Minister and the Chancellor believe that the collapse of the Euro would be the least bad option.  But they are determined to keep their fingerprints off the dagger handle. Otherwise, the ill-will would be too great. We need good relations with the rest of the EU, as it does with us. If we could be certain that common sense and mutual self-interest would prevail, and that the grumbles and bruises would subside with the restoration of realism, there would be no reason to hold back on truth and blunt language. But anyone who thinks that the EU high command is capable of either realism or common sense will also be serving mince pies to Santa Claus on Christmas Eve.

There is a danger. A week ago, it seemed obvious that the Euro was dead. Now, everything is hidden in cloud. I hope that I am wrong, but my guess is that this week's summit will find a way of postponing the crisis, to such an extent the the Eurozone leaders will be able to claim that the problem is solved, because everyone has signed up to full fiscal union. If so, that would be a disaster; a brutal assault on the hopes and life-chances of tens of millions of Europeans; a condemnation of struggling countries – with no tradtion of political stability – to mass unemployment and social unrest. It would sap Europe's life-blood. It would sentence our continent, which could still be a considerable, even indispensable, force for good to further, perhaps terminal, decline.

Let me justify that vehemence. There is nothing wrong with a single currency, as long as two conditions are met. First, a single monetary policy must be accompanied by a single fiscal policy. There is no reason why Motherwell and Mayfair should be in a currency union; their economies are utterly different. The same is true of Manhattan and Mississippi. In both cases, they can hold together, because monetary divergence is eased by fiscal transfers.

Even so, there are moral hazards. In many parts of the UK, there are depressed towns which have lost their former economic raison d'etre and are living on the dole. That is not good for people. It would be much better for the inhabitants if they could sell cheap labour in a weak currency. As that is not possible, we should compensate them for being forced to live under a currency that is too strong by creating enterprise zones and deregulating everything possible. But there is still a price to be paid for living in a single country.

That brings us to the second condition. A common currency does not only depend on economics. It requires national identity: patriotism. This should not be taken for granted, even in countries with a relatively harmonious history. Take the United Kingdom. With the possible exception of the United States of America, the Union of the Parliaments was the most successful constitutional experiment in history. Yet its survival is now in jeopardy. More generally, so is the consent of the governed for the process of government. Why are we obliged to obey the law? There might seem to be an obvious answer: because we fear its sanctions. But that is compulsion, not obligation. The rule of law needs far more than the constable's baton. It requires allegiance and deference. In Britain today, those are both on the wane. The consequences could be grim.

If that is true here, it will be even truer in the lesser nations on the less-favoured side of the channel. Some Euro-fanatics might try to take comfort in a weakening of national cohesion, as if individual states' weaknesses could be Brussels' opportunity. If so, they are as deluded as ever. People may be fed up with being bossed about by their own government. This does not mean that they will rush to the embrace of Euro-bossiness.

Let us assume that there were a deal on fiscal union. Two consequences would follow. The European Central Bank would have to underwrite all sovereign debts denominated in Euros, which would cause serious political trouble in Germany, Finland and Holland. There would also have to be a mechanism for regulating government expenditure and the future issue of debt. A common taxation policy would rapidly follow. There are signs that the French and German governments still believe that this could all be handled by inter-governmentalism with more teeth. The Italians, Greeks et al would have to give promises of much better behaviour in future, on pain of an interview with Nanny Merkel's hairbrush. That is nonsense. To work, the new arrangements would require a central fiscal and monetary authority with the powers of a sovereign government. Otherwise, the markets would rapidly expose its lack of credibility. Fiscal union has an inexorable logic.

So does democracy, on the assumption that this economic union would have a democratic underpinning. Initially, that would not worry the Germans. They still nourish the illusion that given the chance, the rest of Europe would choose to act like them and vote to be like them. They would blithely expect the new Eurozone Parliament to be just like the Bundeshaus: a Christian Democrat bloc and a Social Democrat bloc plus odds and ends, thus guaranteeing administrative continuity. The French would know better. They have enough insight into the anarchic tendencies in their own political soul to distrust everyone else. They have never been interested in a European democracy. They want inter-governmentalism in its French version, which means a French jockey on a German horse. If the nag ever becomes restive, they can apply the whip of war-guilt.

But in a Eurozone Parliament, the French would only have one-fifth of the seats. The French political elite has always been in favour of European union, for two reasons. First, its magniloquence suits the French language. Second, they assume that a united Europe would be a surrogate French empire: a means of resisting the Anglo-Saxons and restoring France to her rightful place as a super-power. When the French realised that magniloquence was not enough, that they could no longer exploit the mechanisms of the EU to protect French interests; that France had lost control of her destiny – there would be mayhem. The first consequence of any moves towards fiscal union would be a sharp increase in French Euro-scepticism, closely followed by the same phenomenon in Germany, when the public realised what their politicians had done.

The second consequence would be a rapid disillusion in other countries. In Italy and Spain, they would realise that they were still locked in to a currency which suited the Germans, but which condemned them to an unending prospect of low growth and high unemployment. Whatever Greece's status in the new arrangements, Procrustes would be in charge of the ECB. Europe would become a stagnant and fractious continent. Everyone would blame everyone else. Timid and derided, the government of the Eurozone would soon lose whatever authority it possessed. Populist parties of the right and left would flourish. Free trade would be threatened, as would civil society. As if this poor old, battered old, beautiful old continent had not suffered enough.

There is, of course, a way out: an easy way to confound every one of the arguments above. It is called popular enthusiasm. If the rising generations in Europe were rallying to the twelve stars, were ready to cope with disruption, were happy to make the necessary sacrifices – it could all work. If you believe that, I hope that Santa brings you everything that you ask for.

Fiscal union is a folly. It is a crime against the peoples of Europe and their future. Its progenitors are not fit to call themselves Europeans. They deserve to stand trial at the Hague, for multiple, grievous and premeditated offences against human rights. There is no easy exit from this folly, which is why the criminals deserve longer sentences. The first few months would be chaotic. But the surgery of short-term chaos is preferable to chronic, crippling incurability. It is always better to crawl away from the edge than to jump over the cliff.