A devastating article in the FT by the former chief restructuring officer in the US Treasury, Jim Millstein, provides a nasty wake-up. He suggests that the “symbiosis” between government debt and bank assets is so great that Europe’s banks have become too big to fail. “Insolvency of one threatens insolvency of the other”, he writes.

Millstein warns that ultimately, European governments will have to abandon their implicit guarantees to the banks in order to protect their own solvency.

‘Death spiral of interdependency’

This is the vast spectre that we are finding it so hard to quantify and hence report.  Millstein warns that European banks are now ‘too big to save’, and that in order to escape what he calls this “death spiral of interdependency”, the bank/government interdependency will either fracture, or be fractured by events.

Into this morass comes Angela Merkel, speaking yesterday at her CDU party conference in Leipzig. The German Chancellor has jumped. Her jump is toward deeper political union. This is the perhaps first step in persuading her people that they will have to play their part in the costly re-structuring of Europe.

On cue, Britain’s Prime Minister, David Cameron has jumped. He has jumped the other way. Speaking at precisely the same moment as Mrs. Merkel, he tells the City that this is the time for EU powers to go the other way – back to constituent governments.

EU tug-of-war

This dangerous tug-of-war is now in play in earnest. Perhaps the crashing of banks is what we can now see on our Christmas horizons; perhaps a Federal Union that lashes Germany to filling the rest of the eurozone’s coffers.

Who can tell in this moment? But I sat next to a prominent banker at dinner last night. He’s a man I trust. His bank may not be in the line of fire - but he knows an awful lot which are.

Hang onto the railings, the winds out there are mighty strong. Does Chancellor Merkel mis-speak when she tells her party: “this is the worst crisis since 1945″?

‘Tis the season of mellow fruitlessness – the season in the political orchard that sees last year’s rotten fruit still on the ground and slim evidence of any spring buds to come.

I cannot remember a general election less looked forward to, nor an array of contestants, across the board, that people feel less enthusiasm for. Even the prospect of unprecedented debate between the leaders feels like avoidable television.

Today’s publication of the British Social Attitudes survey reveals that only 56 per cent of the population think it is “everyone’s duty to vote” – down from 68 per cent in 1991. That is some fall.

It is a finding that my own anecdotal observations concur with. Indeed the finding that only 41 per cent of under 35s think they should is something of which I am even more strongly aware.

There is an apathy out there. There is a disconnect out there which represents a very serious challenge to what we understand as democracy. As politicians battle to blame each other for different aspects of the recession, our own Channel 4 News poll suggests that few are ready to credit their leaders for any of the green shoots you may detect in today’s GDP figures.

For years the population has put up with electoral change in which a party with a minority of the potential popular vote grabs absolute power and proceeds to wield it as if it enjoyed more or less absolute popular support.

Listening to the veteran Labour MP Austin Mitchell last night explaining how he mistakenly overcharged the tax payer by £10,000 for his mortgage made me wonder how it is that all these “mistakes” had left MPs of all parties better off.

The fact is that politics and politicians are enjoying the worst odour any of us have known in any of our lifetimes. Couple this with the dwindling of voting duty and a record low turn-out at the next election beckons.

Who would go into politics to stink of such scent? Who would willingly subject themselves to the bullying and bruising? Then there are Chilcott’s daily reminders of the bizarre decision-making process that led up to Iraq War, with little involvement of the Cabinet let alone parliament.

It’s a bleak landscape out there and the public sees few, if any, political heroes staggering about on it. The next election won’t just be a test of our leaders, it’s also going to be a test of faith in our system of governance.

This comes to you from the Pontignano conference which brings together British and Italian politicians, business, media, and the rest to debate the issues of the day.

We are gathered in the amazing British Embassy residence – a positively palace like establishment with palm strewn lawns, a first century aqua duct, English roses, a butler, staff, large cars and the rest. Recession, what recession?

No wonder the UK chair of the event, Chris Patten, expresses the hope that the Treasury will not exercise its sharpening scythe on this glorious remnant of Imperial times.

The theme this weekend is “After the Crash”, but a remarkable survey of young Italian and British opinion (under thirties) reveals that they think that even that title is wrong, they think we are “passing through” the crash right now.

I suspect they are right. It’s a point stressed by former Italian premier Giuliano Amato stresses in his opening remarks.

This survey of young people also reveals a strong faith in the EU. Fifty per cent of young Italians and 58 per cent of young Brits believe that the Union will make a positive impact to their chances of coming through the crash.

The Economist Intelligence Unit has fascinating data here too. Two very similar countries: Italy’s 58m people to the UK’s 61m. Italians are individually slightly better off, unemployment similar.

But Italy is aging very fast. A third of the population is over 60; in the UK it is one fifth. Both countries have seen a massive increase in public spending. Italy’s budget deficit is 8 per cent of GDP; the UK’s is 14 per cent. Youth unemployment in Italy is 22 per cent; Britain is at 15 per cent.

Just back to that poll of young people. Sixty seven per cent of young Italians believe the worst is yet to come, 25 per cent of Italians blame the government, compared to 26 per cent of Brits. Fifty four per cent of young Italians blame the banks; 54 per cent of young Brits.

In terms of survival, young Brits in general are far more optimistic than their Italian Counterparts. They believe Europe as a bloc will do better in the economic storm than their own nation state.

Amazing candor from Italian Finance Minister Giulio Tremonti: “We still have no idea what to do next about debt repayment, extending more credit and the rest.”

This is the backdrop to a fascinating debate between to relative equals. I shall keep you posted.

I awaken to find a note in my inbox declaring that the government is to lay out plans for dealing with Britain’s credit card disaster.

It is in many ways the least mentioned and most unaddressed financial cancer at the heart of the present financial crisis. UK resident currently owe over £230bn on their credit cards, overdrafts and credit loans.

The website uSwitch reports that over this past tumultuous year 20 per cent of all UK credit card holders had their credit limit INCREASED with out ever being consulted.

This is the equivalent of someone passing the open door of a house and seeing a fire blazing in a downstairs room chucks a can of petrol in for good measure.

At the macro level there is a chronic credit squeeze, but down at the micro, banks, credit card companies, and other financial institutions are engaging in a practice that some would like to see outlawed in today’s white paper.

Fat chance. But let’s look at it. Should it not be such an offence for a finance company of whatever nature to offer, uninvited, indeed to impose uninvited, an increase in credit limits to someone already burdened with debt.

Why not declare it illegal at least for ANY credit company to extend credit limits without contacting and negotiating with the card holder?

Hats off by the way to Barclaycard who, in our collective hour of need, have slashed the minimum repayments on their card from 2.25 per cent to 1.5 per cent.

What a splendid response to current needs – but hang on a moment.. the actual cost of paying to someone who opts only to pay the minimum repayment each month back from a debt of £5,000 will rise from the previous £5,900 to £22,300.

Oh, and at 15.9 per cent APR, the repayment period will extend from 31 years to er… 96 years. I wonder what today’s White Paper will have to say about this.

A New York judge has sentenced Bernie Madoff to 150 years – a verdict that will bring joy to many but relief to very few.

He is likely to take the innermost secrets of his Ponzi scheme, in which he defrauded $65bn out of his investors, to the grave.

So how many more will follow Madoff?Clearly, as things stand the great 20/20 cricketing entrepreneur Sir Allan Stanford appears to be bidding hard.

But when all is said and done, very, very, very few others who will go anywhere near a prison cell for their role in bringing the world’s financial systems to its knees.

There is no likelihood of any conventional banker, credit card operative, or anyone else in the mainstream going to jail.

None of those from within those vast emporia both sides of the Atlantic, whose lack of understanding – or worse – created a crash from which many still think it will take at least a decade to return.

How can it be that this far into Britain’s financial crisis, yet another building society is in trouble?

Tonight the West Bromwich Building Society’s future hangs in the balance as it fights to find extra financial resources to keep going.

But how has the FSA, if it has been doing its job, allowed matters to get this far? Needless to say, they don’t want to talk about it.

It surely poses the question tonight whether the FSA, which so ill served the British financial system in the lead-up to the meltdown, is yet fully fit for purpose.

So to policy now that the personality of the prime minister has, for the time being, been parked.

So what to expect? Mostly obviously, I guess, we look to proposed changes in Post Office ownership, now to be kicked into the long grass.

A possible end, too, for the ID scheme (estimated cost: £5bn), and the abandonment of the Trident nuclear weapons upgrade (£20bn).

What else? How about the abolition of the House of Lords and the Privy Council (£100m) to be replaced by an elected 100 seat senate?

And while we are at it, a cut in the House of Commons, down from 650 plus to 400, moneys saved redistributed among remaining members for proper pay scales, allowances and staffing.

And then there’s the economy.

UK indebtedness as a percentage of gross domestic product outstrips most industrialised nations, with the exception of Japan.

Meanwhile, unemployment is set to rocket – LDV yesterday shed 850 jobs with a further 3,000 at risk at suppliers and dealers. Today Cheltenham and Gloucester is shedding 1,500.

Inflation beckons too. The way Britain’s monetary system is set, interest rates will go up.

Make no mistake, no amount of green shootery (the Purchasing Manager’s Index suggesting growth in demand for product last week; enquiries for houses up this week) will stop us slipping into very desperate times.

This is certainly the view of a very senior mandarin, with whom I spoke yesterday. He says those at the top of the Treasury tree see a few very, very dark years to come.

Meanwhile the Bank of England is engaged in an unprecedented exercise in money printing.

I only got an Economics A-level at Scarborough Tech, so I have to trust those who know.

And those who know tell me prepare for the very worst. Do not spend what you cannot afford and prepare as never before, for the morrow.

The juxtaposition of the huge surge in unemployment with the latest revelations of parliamentary sleaze concentrate the mind no end.

According to one of my well-informed sources, David Cameron’s greatest fear about this continuing crisis is that a credible group of people will come forward and form some sort of party that will contest the next election on the basis of campaigning for one term only, to clear out the current sleaze, institute wholesale parliamentary reform, and then leave the field.

A party with a name like Reform (old school?) or Sweep Out (anarchic?). Might gain traction.

But the truth is that however bankrupt they believe their governing institutions to be, what will be uppermost in the mind of the electors will be their own financial and economic position. With a predicted three to four million jobless by this time next year, the pain will be intensifying.

At the same time, Britain is likely by then to have at least 10,000 men and women tied up in Pakistan and Afghanistan, maybe more, as the position there continues to spiral out of control. Five more of “our boys” were killed there this week alone.

This will be a horrid backdrop against which we shall be asked to re-elect many of the Tories and Labourites who have been embroiled in the current scandal.

The greatest service might be for an independent inventory of which MPs are clean and which are not. There are some very, very clean, and some decidedly not. The problem will reside with those who are merely a bit murky. It may at least be an election in which the individual candidate transcends the party.

In the meantime, stand by for the bit of the parliament for which there has never been an election: the House of Lords. Yes, I’m not going to leave this one alone. Should we not at least consider stopping any more appointments to the Lords until it is sorted out?

I discovered this week our 13th pregnancy in a year. Yes, from a staff of little over 100, 13 of the women workers on Channel 4 News are either expecting or have just delivered babies.

Six of the men workers have fathered or are expecting their partners to deliver babies… 19 out of 100 in one office.

Is it a record? Is it the recession? Is it peer pressure, or just something in the water?