The time for tough decisions is here. In the next few months, the members of the euro area will have to make a choice: create a genuine fiscal and political union or let the euro die a slow death.

The European Union now realises the Greek crisis has revealed some major flaws in the common currency. There's no point trying to fudge it. The euro can only be rescued by a sweeping centralisation of control over tax and spending.

There's just one snag: A single economic government for the eurozone isn't going to work. The surrender of national sovereignty is too great. The timing is all wrong. And there is still no mechanism for enforcing whatever rules are made in Frankfurt or Brussels.

With every step this crisis takes, the euro moves closer to falling apart. In a few years, we'll be talking again about the deutschmark, the franc and the peseta.

After dithering for too long, policy makers now realise the foundations of the euro weren't strong enough. The stability and growth pact, which limited budget deficits to 3% of GDP, didn't work. Greece was running fiscal gaps far larger than those during the good years, and plenty of other nations were as well once the global economy turned down.

It became a massive free lunch. Countries could spend like crazy and get their neighbours to bail them out. It was hard to see how the system could survive for long if those were the rules. Everyone had an incentive to do the spending. No one had an incentive to do the bailouts.

"The commission proposes to reinforce decisively the economic governance in the European Union," the EU said in a statement last week. Member states will have to submit their national budgets to the EU for approval. It isn't hard to see the implications of that.

"The sovereign debt crisis could be acting as a catalyst for an ever closer union of European countries," Morgan Stanley said in a recent note to investors. "The decisions taken this weekend first by European leaders and then by finance ministers mark a big leap towards a fiscal union in the euro area."

A fiscal union – in which budgets and taxes are decided centrally – would fix the problem. Member states wouldn't be able to run up unaffordable deficits. When they ran into trouble, money could be diverted from the more successful states to the ones that needed help. That's how it works within countries. It is how the euro should work, too. But here's why it probably won't.

First, there's the surrender of sovereignty. Countries signed up to a single currency; they didn't sign up for a single government. Once you lose control of fiscal policy, you stop being a nation and become a district. It is hard to believe that will ever survive referenda or national elections. It is hard enough to persuade taxpayers to subsidise regions in the same country. Persuading electorates to send their taxes to a central authority, without having any control over where it is spent, will be impossible.

"The budget law is a matter of national parliaments," Guido Westerwelle, Germany's foreign minister, said last week. "The European Commission doesn't determine the budget. That is the job of the German Bundestag, the national parliament."

Second, there's timing. For the next five years, the only thing governments will be serving up is pain. Deficits are out of control. Spending has to be cut. Creating a fiscal union was going to be tough enough even in the boom years, when you could hand out lots of cash to build schools and roads. It will be much tougher when spending is being cut. The EU will take control of national budgets at precisely the moment they get slashed. Does that sound popular? Not really.

Third, there still isn't an enforcement mechanism. The latest proposal is that all the national budgets get submitted to Brussels in advance. The EU will approve them or it won't.

So what happens if a budget is rejected, and local politicians tell the EU to take a hike? Euro police aren't about to storm member parliaments and cart politicians away in handcuffs. So far, all that has been proposed is a rewrite of the stability pact, but with some more forms to fill in, and a bit of snarling if you break the rules. It didn't work last time, so why should it work now?

The EU has come up with the only realistic solution to the crisis presented by Greece's mountain of debt. But it's still not going to work. And once that becomes clear, there will be only one option left: let the euro die.