Jeremy Beckwith: Germany is the key to whether Greece will stay in the union

The original six have now become 27 and what was essentially a free-trade zone has now been extended to include measures covering human rights, social welfare, the environment, and for those members who wished it, a European Monetary Union.

For some in Europe, the single currency was another project helping to drive forward the "ever closer" political union. For Germany, however, its currency and its international reputation are a fundamental part of the national psyche, and when Germany agreed to join the single currency, its Constitutional Court ruled that anything that might be considered to reduce the integrity and stability of the euro would mean that Germany would have to leave the single currency.

Thus we see the European Central Bank's inflation target set at the same level as Bundesbank used to set, and the same commitment to stability and orthodoxy in monetary policy from the ECB as the Bundesbank used to have.

The other element of this stability is the commitment to the Maastricht treaty's "no bailout" agreement, in which member countries ruled out taking on the debts of other member countries – because this would then endanger the stability of other countries and possibly the currency itself.

The current Greek crisis takes the drive to an "ever closer" union to a critical inflection point – Europe faces a key dilemma in whether to support or bailout Greece on advantageous terms, thus abrogating the no-bailout clause of the Maastricht Treaty.

But at the same time it means taking a massive step toward a real fiscal and political union, since the terms of any bailout would have to involve the ability to monitor, oversee and ultimately take control of Greek government spending at a European level.

Or, it can abide by the principles of the Maastricht Treaty, and let the Greek government default on its debt, possibly leading to Greece being ejected from the single currency, and also leading to massive follow-on pressure on other eurozone members as markets suspect that they too may go down the same path as Greece.

The drive to an "ever-closer" political union would have reached its peak, and in fact the whole process would be likely to go into reverse as each country would feel the need to protect its own national interests.

The key to unlocking this dilemma lies squarely in the hands of Germany, as always the main financial contributor to the EU.

German politicians have been alone in opposing anything that looked like a bailout, not only because of their position with the Constitutional Court, but also because of domestic politics. Greek workers retire much earlier than German workers, and Germany sees no reason why it should lend (or more likely, give) money to support them.

Thus Germany has insisted on the involvement of the International Monetary Fund in any rescue package, that it maintains a right to veto any help and also, crucially, that any money lent to Greece should be on market terms, so that no element of subsidy or bailout should be visible. This is of little help to Greece which cannot afford the current market terms.

There appears to be no good long-term solution to this dilemma.

The recent EU agreement to lend Greece 30bn for three years at 5 per cent is a classic EU compromise but is nevertheless a bailout, given that even following that announcement Greek three-year bonds trade at over 7 per cent. It has to pass through the German parliament and is open to legal challenge in the Constitutional Court. Indeed, there may already be a challenge.

This compromise may work for now, with the markets allowing Greece to borrow enough to keep them going for another few months, but their debt position is unsustainable and another crisis will erupt at some point.

Then Germany will find itself forced to choose between its commitment to financial stability and the need for European solidarity. If as seems likely, they opt for financial stability, the price will be the end of the 50-year trend towards an ever-closer union in Europe.

Jeremy Beckwith is chief investment officer for Kleinwort Benson