After two years without serious international coordination, the central banks of the developed world last week acted together in the face of the latest version of the euro crisis.

The central banks of the United States, Europe, Japan, Britain and Japan set up currency swap arrangements to ensure that Europe's commercial banks would be able to borrow dollars, which U.S. commercial banks were increasingly reluctant to lend.

They have eased the problem rather than solved it. U.S. banks are understandably worried that European banks, their balance sheets loaded down with dubious Greek, Portuguese, Spanish and Italian bonds, wouldn't be solvent if one or more of those countries defaults.

That worry remains but at least the European banks won't face an immediate crisis of liquidity even as they continue to labor under the threat of insolvency.

So maybe it is time to look down into the abyss and see how deep it is and just how much damage a break-up of the eurozone would inflict on the global economy.

So far, most assessments have looked at the damage to Europe's banks if the Greeks and then the Portuguese and Spaniards default on their debts and are forced out of the euro. Goldman Sachs said, a Greek default alone would trigger losses of as much as $127 billion in 38 banks across Europe.

But Europe's banks are holding a total of $480 billion in Greek, Irish, Portuguese and Spanish bonds. So if the Greek contagion spreads to the rest of the euro periphery it would imperil the while European financial system since it would create instant solvency problems for the banks that hold such bonds as core capital. That is why Moody's rating agency last week downgraded two of France's top three banks and put the third on watch.

There is a further problem. Such a default would jeopardize the European Central Bank itself since its balance sheet is so swollen with the bonds it has been buying from the four endangered countries that it is starting to look (as der Spiegel has suggested) like an "enormous bad bank." Without even raising the distinct possibility that the contagion would spread to Italy, the ECB itself could be in need of a bailout.

But the problem is even more serious, since it is difficult to see the European Union as an institution surviving the fall of the euro. Certainly the single market, which is the essential economic structure of the EU, would be almost impossible to maintain.

It would be as if the United Sates suddenly ceased to be and the 50 individual states resume their own sovereignties, their separate currencies and laws and armies and the guarantee of tariff-free trade enshrined in the inter-state commerce legislation.

The essence of the European Union's single market is a commitment by all 27 member states to the free movement of labor, goods and capital. But this couldn't survive a breakup of the euro.

If Greece, for example, is forced out of the euro, then in its effort to build a new drachma it would have to restrict the movement if capital. It couldn't afford a flood of local money into British or German banks. It would have to impose capital controls.

Then those less vulnerable countries in northern Europe decide they cannot afford the flood into their cities of Greek and Portuguese and Spanish citizens looking for work. That re-imposes controls on the free movement of labor.

And when the ex-euro countries devalue, their products (like their labor costs) will become very cheap against the euro and they will try to export their way back to prosperity. It won't take long for the companies and labor unions in the eurozone to demand protection against this low-wage competition.

That is the end to the free movement of goods and it is hard to see anything of the EU surviving after that.

And in the meantime, the fate of the core countries that can afford to stay in the euro will become problematic. As soon as the weak members of the euro leave the currency zone, then the euro will quickly become much stronger on the currency markets. A new euro shorn of Greece, Spain, Portugal, Italy and Portugal would look very attractive indeed. Instead of taking $1.30 to buy a euro it would take $2 and maybe more.

This strong euro would quickly confront the new eurozone with a serious trade problem. With the price of its exports soaring and the price of imports falling, it would face a dangerous trade deficit. Germans may like their VW cars but if an almost comparable Fiat can be bought for half the price many will be tempted to take advantage of the windfall. At the same time, the ex-euro countries won't be buying many Mercedes.

UBS stunned many observers when it estimated that with a breakup of the euro the gross domestic product in strong euro countries could shrink by 25 percent and by as much as 50 percent in weak ones. But even a decline in GDP of half of those levels would trigger social and political crises on a scale we haven't seen since 1945. When looking into the abyss, that is how deep it gets.

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