The spread on Greek bonds is already as wide now as it was before the European Union launched its massive trillion-dollar bailout package in May. Bond buyers are demanding 8.35 percent more interest than they do on German bonds. And the European Central Bank has now notched up some $450 billion in new debt for the troubled eurozone countries.

How bad will the autumn crisis be? That will depend on a number of factors but two of the most important will be the militancy of eurozone public faced with spending cuts and shrinking living standards and the political will of governments to resist.

Any repeat of the Greek riots of this spring would ring load alarm bells across the markets. The prospects are troubling. Labor union leaders in Greece, where the unemployment rate is more than 20 percent (and has reached 70 percent in some depressed areas) are predicting a hot autumn. Senior members of the governing Pasok party warn that their own government is provoking a "social explosion."

Urging Greece to bear the pain now for the country's long-term good, EU Commission spokesman Amadeu Altafaj said last week: "We are aware of the social tensions that exist. This impact from these important reforms is certain, we will not play with words with that."

Across the EU, governments have announced a total of $600 billion in public spending cuts over the next three years (almost one-third of the cuts in Britain alone). But already governments are starting to back from their own austerity packages. Spain has already started to undo its planned public spending cuts, reprieving a $600 million reduction in spending on road and rail projects.

The prospect of an autumn crisis would be more manageable had there been real improvement in the underlying structural distortions that led to the great recession. With the sharp drops in world trade and output and banking collapses, it seemed at first that some fundamental changes in consumer behavior and financial regulation were under way. But the promised reforms in regulation have been weakened by bank lobbying and any cuts in consumer debt have been more than matched by the dizzying rise in government debt

Most economists of left and right now broadly agree on two of the mega-causes of the crash. The first was that some countries, such as the United States, Britain and Spain, built up chronic trade deficits while others, such as China and Germany, built up chronic trade surpluses. The second was that these trade deficit countries also went into chronic budget deficits, borrowing money in order to live beyond their means.

These two trends were interlinked. Indeed, the deficits of the debtors were the mirror image of the surpluses of the creditor countries. And those surpluses were then recycled. China bought U.S. Treasury bonds, which reduced U.S. interest rates and made it easier for consumers to borrow even more.

The evidence is now clear that China and Germany haven't reduced their trade surpluses. Indeed, one of the few bright spots in the eurozone economy is the German export boom. And the U.S. trade deficit has risen ominously again this summer, (along with the latest gloomy figures of rising unemployment).

The picture is mixed among British and U.S. consumers. There have been some reductions in personal debt and spending. In June, U.S. credit card balances fell by $4.5 billion, or 6 percent, the 21st consecutive month of declining balances. The U.S. savings rate is up to 6.4 percent and the British rate is slightly down on last year's high to 6.9 percent.

While better than the negative savings levels just before the recession hit, these are still far short of German savings at 11.6 percent. A modest shift has taken place away from the profligate habit of debt-fueled consumption but as consumers try to reduce their own debt, governments and the central banks have been taking their place.

In many ways the most scary feature of the current recession and the very mild bumpy recovery is how little recovery we are getting from massive amounts of deficit spending from Washington and liquidity creation from the federal reserve.

That was why Thursday's report from the Philadelphia branch of the Fed, suggesting that the economy was drifting into a second recession, was so dismaying. Manufacturing activity in the Philly region fell further in August after two months of slowing and went into decline for the first time in 12 months. The index of current activity fell to negative-7.7 from a reading of 5.1 in July. New orders and shipments activity also looked grim in August, with the index for new orders falling by 7 percent and for shipments by 4.5 percent.

And neither German nor Chinese consumers look like coming to the rescue. New car sales in China are plunging and personal consumption still creeps along at an unbelievably low 35 percent of gross domestic product. Germany's investor confidence index has just gone down and while personal consumption was fractionally up in the second quarter, it was down in the three quarters before that.

If the global economy was recovering healthily, it could take the shock of the new eurozone crisis that will begin in Greece once the tourists leave. But it isn't so it won't.

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