The European Union is in need of a new economic strategy.

The veracity of that statement might seem indisputable, as various EU countries, led by Greece, struggle to avoid being crushed by their accumulated debts. But in the surreal bureaucratic thinking of the EU, the reason it needs a new economic strategy has as much to do with the fact that its previous one is nearing its expiry date as any desperate need to deal with the current crisis.

In March 2000, the EU set out its strategy for the next decade. It wasn't unambitious. In fact, it showed an heroic determination to ignore what was going on elsewhere in the world, for at the heart of the economic policy was a new strategic goal: "to become the most competitive and dynamic knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion."

Bank of England governor Mervyn King at a G-7 meeting in Canada Associated Press

It seems almost cruel now to revisit the document which explained how this was to be achieved. There was to be an emphasis on "modernizing the European social model, investing in people and combating social exclusion" and a drive to "improve the quality and sustainability of public finances."

Such was the blinkered, Eurocentric vision of the world that it hadn't focused on the challenges rising from China and India. The latter Monday said its growth was now steaming ahead at 7.2% a year, a level of dynamism EU countries couldn't dream of emulating.

It seems unlikely that, when they meet in Brussels on Thursday for a special economic summit, the EU's leaders will devote much time to assessing just how far short they have fallen of the targets they set in 2000. Neither are they likely to want to dwell on the reasons for such abject failure. The concise explanation though is that talking is easy, doing is much harder.

Europe's leaders continue to utter grand pronouncements. Over the weekend, they were doing so in the suitably chilly environment of Iqaluit, Canada's Inuit capital, at a meeting of the G-7 finance ministers.

According to Timothy Geithner, the U.S. secretary of Treasury: "The European authorities gave us a very comprehensive review of the program now in place to address the challenges faced by the Greek economy."

If Mr. Geithner was truly reassured by what he heard, then either he must be gullible in the extreme, which wouldn't be ideal, given the job he holds, or he was told rather more than the rest of the world has heard.

The markets are making it very clear that they are anything but sanguine over Greece's ability to cope with its plight unaided. Opinion polls show the majority of Greeks approve the austerity measures the government has announced, but a looming general strike this week indicates that individuals' approval is theoretical and doesn't apply to measures that will hit them personally. Hence the conviction that some sort of bailout for the country will prove to be essential

As the finance ministers sledded away from their conference, a less positive view of the proceedings came from the former chief economist of the International Monetary Fund. "The G-7 is fundamentally useless," declared Simon Johnson. He added: "The G-7 countries are completely asleep at the wheel."

While Mr. Geithner may have been persuaded that the Greek situation was controllable, Mr. Johnson recognized what the markets fear. "There's a very serious crisis inside the euro zone," he said.

Greece is only the worst of the offenders against economic probity and it may not be the only country to require a bailout. The euro, which not so long ago harbored grandiose dreams of being a reserve currency, now looks sickly.

It was never going to be easy to make a single currency work for so many diverse countries with very different economic models. A central bank setting interest rates in a vacuum, while constituent governments have control over fiscal and economic policy, always looked flawed.

That is why the economic policy set down in 2000 talked of the need to "pursue fiscal consolidation." This was, you see, the work of the Lisbon European Council. It was the talk of closer integration of the various EU countries which caused such angst amongst those who argued that the EU should be limited in its ambitions, a single market but not a single political entity.

Yet the problems now enveloping the bloc will give impetus to those who still want to pursue the latter model. Spain has already indicated that it will use Thursday's meeting to call for a more unified EU.

Spain took over the rotating presidency of the EU at the beginning of this year. The country's prime minister, Jose Luis Rodriguez Zapatero, said last week that he believed the economic plan for the next ten years should involve a move to a single economic policy for the EU, covering spending, investment and tax policies.

"The Lisbon Treaty allows more coordination. We should make sure to give the Commission new powers," he said, a view apparently endorsed by France's President Nicholas Sarkozy.

Having remained outside the single currency, Britain will be on the sidelines of such a debate. Many in the country were dubious about the implications of the Lisbon Treaty and its eventual acceptance by the government without a referendum was a cause of some controversy.

But if the stronger countries in the euro zone are going to have to come to the aid of the weaker ones, then they may rightly feel that they need to have more input into how those countries are run. Assurances from the Greek premier that he will put his house in order may not be enough to persuade Germany that sufficient change will be wrought. This crisis is not just about sovereign debt; it could end up being about sovereignty itself.

Write to Patience Wheatcroft at