The turmoil across the European financial markets caused by the Greek debt crisis showed no signs of abating at the close of business on Friday. The threat to the euro economies remains very real.

The events of the week were epic in terms of the history of the European Union. Hopefully, after the eurozone leaders' summit, some calm will return to the money markets. But the chaos must serve as the strongest wake-up call imaginable for the European partners who have been sleepwalking into a crisis with global consequences that, to some extent, has been of their own making.

The panic that has beset the markets has been portrayed by everyone, from anarchists on Greek streets to the president of the European Commission Jose Manuel Barroso, as the work of speculators keen to make a fast buck.

President Sarkozy of France and Angela Merkel in Germany were quick to get in on the act as they jointly called for the power of the credit rating agencies to be diluted because of their role in "crisis propagation". Merkel cast it as a battle between governments and the markets. This is disingenuous on the part of Europe's political leadership. It is true that the eurozone countries in particularl have been rocked to their foundations by the Greek debt crisis. They have had to come up with an extremely expensive bailout – ranging from €22bn from the Germans, down to €1.5bn from us, the black irony of it being we'll have to borrow the lot.

Angela Merkel herself warned that the entire EU is at risk because of the contagion caused by the turmoil in Greece.

But in so many ways, Europe only has itself to blame.

While the EU seems to have a regulation for everything from the shape of bananas to a comprehensive compensation package for airline passengers delayed by volcanos, the eurozone members seem to have omitted the creation of a transparent and properly regulated system of assessing the creditworthiness of nations who want to join the currency club.

It does not have a strategy or a cast-iron policy ready to click into action to deal with members who get into debt. It has no IMF-style resource on hand, ready to bail out member states who find themselves in trouble. It has no enforceable mechanism to ensure financial statistics from member states are a true and accurate reflection of the state of their finances. It has no mechanism to allow countries to leave the euro should meltdown, bankruptcy and default become an unstoppable certainty.

It has been impossible to contain Greece's problems because the response of its eurozone partners until last week has been ad-hoc and piecemeal. Rather than acting in concert to protect the euro, individual countries looked to their domestic priorities first. Germany, in the midst of regional elections, did not want to have to ask its people to cough up €22bn to rescue the Greeks, where corruption, tax avoidance and public sector inefficiency are a way of life.

Intervention has been too late to quell either opposition on the streets of Athens or the major fears of investors. The entire eurozone has allowed itself to be weakened and exposed with fears of a second banking crisis even hitting markets in the United States and Asia.

Eurosceptics say they predicted it would all end in the sort of financial tears we are now witnessing because, they argue, monetary union without fiscal and political union is impossible.

Perhaps they have a point. Certainly, in the light of what happened last week, only a swift and credible response by eurozone members will silence its attackers. Monetary union has been of huge benefit to both the large wealthy nations of Europe as well as the smaller countries on the periphery. But it won't work for much longer unless it builds bulwarks for itself on firmer foundations than tough words from the European Commission and no action at all from the European Central Bank.

Some first steps were taken last week. Greece finally passed the legislation introducing the austerity measures attached to its IMF/eurozone bailout. The fact that it must give a three-monthly progress report to the IMF and ECB is an important confidence-builder. With the €110bn bailout guaranteed, the Greek government has the breathing space to implement reforms before it has to go back to the markets to borrow again.

But if Greece fails to implement the plan, the Eurozone countries must work out an endgame. It must be able to enforce the ultimate sanction: expulsion from the currency. Fool me once, goes the old proverb, shame on you, fool me twice, shame on me.