First Greece, then Portugal, and then what? The project of European monetary union is entering the most dangerous phase in its 11-year history. Last week, eurozone governments started preparations, for the first time, to bail out one of their fellow members. Greece will probably require a bridging loan at some point. Portugal might too. But they are small countries. No matter what happens, it will not break the euro.

The clear and present danger to the eurozone is Spain. Daniel Gros of the Centre for European Policy Studies argued on these pages last week that Spain is in a better position than Greece because of its higher rate of gross national savings. But I believe that Spain is likely to squander that advantage. Spain, like Greece, has suffered from an extreme loss of competitiveness during a period in which it relied on a housing bubble to generate prosperity. While the Greek government is at least beginning to recognise the need for reform, perhaps too late, Spain's political establishment remains in denial.

So what if Spain gets into trouble? Will the eurozone falter, as Nouriel Roubini, professor of economics at New York University, predicted in an interview last week? The question is unanswerable. I find it more constructive to ask what the eurozone will need to do to survive the strains ahead. Three measures are, in my view, essential for survival; a further three almost so.

The first of the essential conditions is a robust and transparent system of crisis management. Maybe the Greek bail-out will provide a blueprint for such a system. But in any case, it would need to be worked out formally and approved by national parliaments to achieve a maximum degree of legitimacy. This should not be imposed by diktat.

A good crisis-resolution system must also minimise moral hazard. Countries that benefit from help will have to accept a partial loss of sovereignty, and for this reason it is important that any such regime has wide political backing in all the member states. While eurozone members lack the political will for unconditional bail-outs, they accept that they need to help each other during a crisis. But this help is attached to the condition that the recipient takes corrective action.

The second essential prerequisite for survival is a reduction in internal imbalances, which lie at the core of the current crisis. This is an issue that requires action both in countries with large current account deficits, such as Greece and Spain, and in those with large surpluses such as Germany. While Spain, for example, would need to reform its labour market to bring about adjustments in real wages, Germany should implement policies to stimulate consumption, including a long-overdue income tax reform. The build-up of these imbalances is the underlying reason why the Greek problem got out of hand.

The place to handle this co-ordination is the eurogroup of the finance ministers of the eurozone, which now constitutes an official European Union institution under the Lisbon treaty. Jean-Claude Juncker, the prime minister of Luxembourg and chairman of the eurogroup, should make imbalances the defining issue of his agenda and propose binding policies.

Third, the EU should at some point revisit the now almost totally decaffeinated proposals for financial supervision. What started off as a deeply unimpressive set of recommendations by the De Larosière committee ended up further diluted as it proceeded through the EU's legislative mills. The financial system remains the single biggest threat to the long-term stability of the eurozone economy. Fragmented financial regulation makes no sense in a monetary union and is potentially lethal.