An elderly woman begs by the Bank of Greece headquarters in Athens on February 14, 2012.

Story highlights

CNN's Richard Quest believes Greece's membership of the eurozone is untenable under the current conditions

But an exit from the common currency could make Lehman's collapse look like a tea party if it is badly handled

And Spain is in the markets' sights, which is a real problem

Quest believes the currency will survive, but not in the present form

Editor’s Note: Richard Quest is CNN’s foremost international business correspondent and presenter of Quest Means Business, which airs 1800 GMT weekdays. Follow him on Twitter.

London CNN  — 

The wheels are coming off the wagon. The fat lady is about to sing. The proverbial is about to hit the fan. It doesn’t matter which saying you use, the facts are inescapable. Greece’s membership of the eurozone is untenable under the current conditions and everyone knows it. Some like Hungary’s finance minister say openly Greece will leave the euro. The only question is what catalyst will force it out and when. The nearest deadline to hand is the country’s June 17th elections, when the Greek voters will decide whether to support parties who will adhere to the bailout agreements or those who want to tear them up.

Private economists have gone into overdrive trying to work out what will happen. A week ago, Bank of America Merrill Lynch published “what if Greece Exits the Euro” describing the risk as “rising.” Citigroup uses the word “probable” for an exit in certain circumstances while Barclays published “dealing with a potential Greek exit” and says “over the longer horizon the likelihood increases.”

For the more circumspect euro politicians who have to manage this crisis, there are now well trodden formulae trotted out whenever Greece’s euro-future is mentioned. It goes something like this: 1. We want Greece to stay in the euro. 2. Greece must abide by the terms of its agreements with lenders. 3. It is up to the Greek people how they will vote and if they remain in the euro. Think of it as the euro-dance….two steps forward one step back.

With the debt crisis unfolding: What does it mean to be Greek?

Some Europe officials have become truly expert at performing this dance. Olli Rehn, the European Union economics chief, has reiterated it to me. And yet, I reason they must be contemplating what happens when the music stops and the euro-dance comes to an end. They read the same economics as the rest of us. They know that the Greek economy is deeply uncompetitive. The reforms need not only to continue, but speed up if Greece is not to remain on euro-life support forever. The only question is whether the Greek people are prepared to put up with the pain.

Each day there comes a new twist into the euro-dance. There was the rumor that Mrs. Merkel had asked Greece to hold a simultaneous referendum with the election on euro-membership. The report came from Athens: Berlin denied it. Clearly one side or the other is playing high stakes hoping to force the issue.

The argument goes like this: Since every poll shows a significant majority of Greek people want to stay in the euro, make the June vote a referendum on this issue and voters will come to their senses and be herded back to safely voting for those parties committed to the euro-dance formula.

While I’ve no idea how these next Greek elections are going to turn out, my gut feeling is that the other eurozone countries are likely to stay with the stick, and keep any carrots to offer if and when the voters return to their sanity (as seen from Brussels).

But opinion polls show Greece’s left-leaning Syriza party, which does not support the austerity plans, has maintained momentum on the back of the Greek people’s discontent. If this continues, prepare for Greece to crash out of the euro sooner rather than later.

Because if they do not follow the austerity plans, the Greek government will not receive more bailout loans to pay its debts. And if that happens, it’s not going to be pretty. The Greek banks will collapse – they are already on fraying central bank lifelines – unemployment will soar and I wouldn’t rule out civil unrest. Who knows what it will look like.

Despite everyone talking about other countries that have defaulted then recovered strongly (Argentina, Russia) the reality is nothing this complicated has ever been tried before, certainly not in such a global interconnected world. Let me say it clearly and loudly. The fear is that Lehman Brothers in 2008 will look like a tea party if they get this one wrong.

What is worrying is that if Greece (only 3% of EU economy) goes is who will be next? Hungarian finance minister Gyorgy Matolcsy, who I also spoke to recently, thinks Greece won’t be the only country to exit.

Obviously now everyone has Spain in their sights. And there is where the real problem lies. Spain is too big to fully bail out a la Greece and definitely too big too fail. If Spain gets into too much trouble “Project Euro” is likely over. From all my private talks with European officials it has become clear – Spain is the line in the sand. Greece may be too far gone and be allowed to fall, but Spain will be defended till the bitter end. So I fully expect European leaders to give Spain something to take the boot off the throat of austerity in the coming weeks. Probably the same for Portugal.

European officials have made mistakes in their dealings with Greece. The austerity measures were too harsh. They shouldn’t have been nearly so brutal, and that lesson has been learned. Now with the election of Francois Hollande as France’s new president everyone can change course slightly and pretend they meant to do it all along (they didn’t). Expect a growth pact to be agreed between Germany and France to sit alongside the main Fiscal Compact, which Germany will not allow to be re-opened.

I could speculate for hours about which solution will be found, what formula they will adopt to keep the whole thing moving – and frankly, it would be useless. This crisis is now moving too fast and has taken on a life of its own. The firewall is starting to smolder. The austerity plans are starting to fray. The European Central Bank is cutting loose several Greek banks it does not consider solvent. The eurozone is all but back in recession. There are some uncontrollable aspects (the Greek voters for instance) which make forecasting the future direction just about impossible.

I still believe that the single currency will survive in some shape and form. I just cannot see the eurozone surviving in its present form – not without the most drastic reorganization towards fiscal union, a federation of states with a central bank and treasury.

Please, eurozone, don’t tell me that is not the European way. I am telling you….it’s the only way. Your way has failed and Europe’s 300 million people are now relegated to slow, second class growth as a result for the foreseeable future.