After more than two years of eurozone crisis, I am beginning to come round to the view that Dr Alfred Sant’s scepticism about the wisdom of Malta joining the eurozone is being proved right. The demonisation of Alfred Sant, so skilfully manipulated by Gonzi PN apologists, was wrong and unfair as events in so many different fields are now proving. As to Malta’s decision to join the European Union, on which the Labour Party that he led lost a referendum, the jury is still out. Only time will tell whether the inability of the eurozone to solve its economic and political crisis will also bring down the EU itself.

I write as a former, convinced Europhile who supported whole-heartedly Britain’s referendum in 1975 to stay in the EEC, the forerunner to the EU, and Malta’s bid to join in 2003/4. There can be no question that Malta has gained hugely from joining the EU eight years ago. Despite the inevitable loss of sovereignty this has entailed, it has been far outweighed by the benefits of economic development, security and the intangibles of “Europeanisation”. However, my enthusiasm for the EU has been dented after the experience of the last couple of years as the flawed eurozone chickens have come home to roost and the historical fissures in this still deeply divided continent begin to open up again.

Malta, together with the rest of the eurozone, finds itself once more at a critical juncture. Greece is teetering on the verge of collapse. A Greek exit from the euro seems inevitable as well as imminent. EU leaders will be faced within the next few weeks with the dilemma of whether to give the Greeks more money, or let them leave the euro. The autumn may prove to be the time when the eurozone comes up with a lasting solution to its future − or falls apart.

The solution rests almost entirely on the shoulders of one country, Germany, and one person, Chancellor Angela Merkel. Her dilemma is acute. For Germany to lose the euro now would be a catastrophe, both economically and politically. On the other hand, to save European monetary union, Germany will have to fund the bailouts, inflate its economy and stand behind the debts of all those countries – chiefly Spain, Ireland, Portugal and Cyprus, but there may also be others, like Slovenia – that have not undertaken the necessary fiscal and austerity reforms.

Unsurprisingly, the German people (and the Dutch and Finns and Austrians, too) are reluctant to do this. Angela Merkel herself, with a tight election looming in 2013, finds herself playing for time – when this precious commodity may be fast running out. Neither Germany’s declared, ostensible commitment to save the euro, nor the promises of the debtor countries to reform are entirely credible to the money markets, leading them to continue to speculate on the euro’s future. The cost of saving the euro rises almost daily.

Waiting for a solution to turn up is both hugely risky, as well as expensive. The Economist of 11 August contains a brilliantly perceptive “Memorandum” to Angela Merkel, written from a German perspective as though by a top civil servant, in which he (or she) sets out objectively and starkly the two options facing her. The first examines the option, which may be forced upon her imminently: an exit by Greece as a result of “gross dereliction of its duties under the various bailout agreements”. The second is Eurogeddon Plan B: the wider, deliberate exit, or excision rather, from the eurozone of those countries that “have failed the euro test... those already rescued or requesting bailouts”. These are essentially Ireland, Portugal, Cyprus and Spain. Greece is assumed to be a busted flush.

The Memorandum consists of an honest cost-benefit analysis and sets out the likely costs to Germany of both options. It concludes that “if Greece has to depart, it should not go alone and that “the larger break-up” [the simultaneous departure of Ireland, Portugal, Cyprus and Spain] “makes more overall economic sense in the long run than an exit of Greece alone”. The costs to Germany of either option would be massive – estimated at about 4.5 per cent of German GDP in the case of an exit of Greece alone, and 15 per cent of German GDP if all five countries left the eurozone under Plan B.

Clearly, the “Memorandum” is an imaginative spoof (it ends by saying that “after reading it, Mrs Merkel thought long and hard about how to respond... After much deliberation she concluded that despite the advantages of Plan B compared with her current strategy, she was unwilling to countenance the associated risks – at least for the moment. She ordered the memo to be shredded, resolving that if the euro area is to fragment, it will not be at her behest”). But the memo is undeniably based as nearly as possible on funding assessments, which are broadly in the public domain, and stems from a highly intelligent and objective operational assessment of the situation.

The “Memorandum” should be required reading for our Minister of Finance, described by The Times the other day as being “optimistic” about Malta’s economic future. One hopes that his optimism is based on a rational assessment of the ratcheting up of the unfolding eurozone crisis and a clear vision of the implications for Malta of the possible developments set out in The Economist Memorandum. For an indication of the possible costs to Malta of both of the options in the Memorandum he need only calculate Malta’s undertakings under the various bailout agreements relative to Germany’s to get a ball-park figure. If he is sensible, the Minister and his Cabinet colleagues might also consider – as Finland is already doing − whether continued membership of the eurozone remains in Malta’s long-term national interest.

What Europe needs now – and has needed for two years − is a master plan or “grand bargain” in which all the decisions vital to putting the euro on a sound economic footing are taken. The time for decision is long overdue. Germany, and The Netherlands, which goes to the polls next month, Finland, Luxembourg and Austria have to agree to some form of debt mutualisation, while simultaneously implementing agreed fiscal stimulus measures.

All European economies are virtually static (some are in recession) and the need for growth is crucial. Moderating austerity is now a priority. For their part, all the debtor nations will have to agree to reform and to do so in a credible and properly planned manner within an agreed time span. A comprehensive plan to clean up bank balance sheets must be undertaken along with long-term plans for changes to banking and fiscal policy. Time is of the essence.

Every EU leader from Angela Merkel down knows that this is the only way forward. But a Greek exit within the next few weeks could trigger Eurogeddon. The options in The Economist’s Memorandum may be an excellent way of focusing politicians’ minds on the alternatives, but they may also soon enough become reality. Malta’s own contingency plans need to be polished up.