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The truth is many European countries have borrowed too much and are still borrowing too much. If a country which is weak financially has to go to the aid of another country which is even weaker, you do not end up with two strong countries, but with two weak ones. The danger in a weakened Euro zone is that if one country needs a big bail out, it may start to drag down others and in turn undermine the whole system.

The bizarre thing in the whole debate is how many people just assert that cutting public spending by 10% is too much, too cruel, impossible. Given the enormous waste and inefficiency of European public sectors, cutting by 10% is technically very easy. If they really do believe in solidarity all they need do is cut all the salaries, other than the lowest paid, by 10% and put on a staff freeze: the costs will come roaring down. It is high time the public sector joined the reality that parts of the private sector has had to endure for a couple of years. There is no way out of a debt crisis other than curbing spending and repaying some debt. The longer they delay the inevitable, the worse the crisis will be.

Greece is today in the front line of the battle between the markets and overspending governments. Tomorrow it could move on to include Portugal, Spain, even the UK. The markets will want to extract higher interest rates from governments that borrow too much. They will want to force a change of conduct they believe in. Just as governments were all too ready to preach to banks and the private sector about the perils of borrowing too much, so markets are now in a mood to do the same back to governments.

The sovereign debt crisis may still be in its early phases. UK debt is no longer rated alongside Germany's, with the UK having to pay more than Germany to borrow longer-term money. Greek debt is now rated well below fellow Euro members' debt, reflecting market worries about the level of Greek state borrowing. We expect more market pressures against all the weaker states financially. That is why we have avoided or sold UK government bonds and continue to recommend that investors stay out of all sovereign debt bonds from countries with large deficits and no credible and detailed deficit reduction programmes.  The move to higher government bond rates to reflect risk is still underway and has further to go.