Later this week, probably on Thursday, Europe's leaders meet to discuss the latest crisis to engulf the eurozone.

Unlike previous eurozone crises, which often had a certain ritual quality, this one is the real deal. With Spain and Italy in the firing line, there is now a not insignificant chance that the eurozone could disintegrate.

Unlike other large single currency areas, the eurozone is a monetary but not a fiscal union.

This means that while it has one central bank, the ECB, which sets interest rates, it has 17 different finance departments.

Each of these national finance departments sets public spending and taxation levels for their own countries. Inevitably some countries' finance departments have made a better fist of things than others. While Germany's kept a tight grip on public spending and ensured that costs were nailed to the floor, Greece and Ireland partied like there was no tomorrow.

Disastrous

The Greeks retired at 50, while in this country we sold each other more and more overpriced houses which we paid for with borrowed money. Now that the bills have come due, the Germans are not unnaturally reluctant to bail out the feckless Greeks and Irish.

Having recently increased their retirement age to 67, and having been forced to give up their beloved D-mark for the euro, most German voters are in no mood to put their hands in their pockets to subsidise those who have been less frugal. As the borrowing costs of the peripheral eurozone countries, initially Greece, Ireland and Portugal, but now Spain and Italy also, reach unaffordable levels and raise the very real possibility that one or more of them will default on their debts, with disastrous consequences for the entire eurozone, the clamour for so-called "eurobonds" has steadily risen in volume.

The latest to join the cacophony was Minister for Foreign Affairs Eamon Gilmore at the weekend.

So what are eurobonds and why are they apparently such a good idea? At the moment each of the eurozone's 17-member countries issue their own bonds.

This means that there is a huge disparity in the cost of borrowing for different countries with Germany, the most credit-worthy country, paying an interest rate of just 3pc on its 10-year bonds while cash-strapped Ireland pays 13pc and Greece 17pc.

If, instead of each country issuing its own bonds, the eurozone issued its own eurobonds, which were guaranteed by all of the 17-member countries, then the cost of borrowing for countries such as Ireland and Greece would fall dramatically. So why hasn't it happened already if it's such a good idea? For a start eurobonds would effectively make German taxpayers liable for Greek and Irish debts. There is no way that Angela Merkel could sell that to her voters, particularly as the increased risk to Germany would almost certainly push up its borrowing costs.

Shame

Even if the Germans could somehow be persuaded to guarantee Greek and Irish debts, there is another even bigger problem. The issue of eurobonds would inevitably lead to the development of a pan-eurozone finance ministry.

It might not be called that, but the body issuing eurobonds would have to have the power to dictate taxation and public spending levels to the individual member-countries, if it was to persuade investors to lend it money.

If the chances of Angela Merkel persuading her electorate to shoulder the risk of Greek and Irish debt is remote, then the chances of any eurozone country handing over control of its fiscal policy to a new supra-national finance ministry are non-existent. So the final verdict on eurobonds must be: great idea, shame about the politics.