Leading article: Britain cannot stand apart from the euro crisis

Exceptionally threatening. Such is the Governor of the Bank of England's assessment of the euro crisis. Indeed, the situation is so perilous that Sir Mervyn King is urging Britain's banks to boost their financial buffers post-haste, and his staff have contingency plans in case the single currency breaks up altogether.

Nor is Sir Mervyn the only central banker to be conducting hasty defensive manoeuvres. The Federal Reserve decision to slash dollar lending rates speaks volumes about Amrican concerns that the euro panic is turning into a second credit crunch.

Unfortunately, as Sir Mervyn points out, central banks cannot solve the eurozone's problems. Only Europe's politicians can do that. But there is a faint glimmer of hope. Finally, after months of cavilling and denial, European leaders are at least trying to forge the necessary political solution.

The euro crisis has passed so many turning points with so little progress being made that the prospect of yet another "critical" summit is hard to credit. But next week's meeting of European leaders is indeed critical. Angela Merkel and Nicolas Sarkozy are to set out their vision of a "stability union", which will, in effect, establish the fiscal equivalent of the single currency by allowing, for example, central oversight of members' budgets and automatic sanctions if rules on debt are broken.

Berlin, at least, hopes that a broad agreement will be enough to calm the markets and buy time for a formal deal at the EU Council meeting in March, to be ratified the following December. It is a timetable that can only exist in the realm of fantasy, given the constitutional implications of eurozone members surrendering elements of budgetary control. But that is hardly the point.

Germany has refused to countenance either plausible solution to the markets' acute loss of trust in eurozone sovereign debt: namely, either eurobonds, or the European Central Bank (ECB) acting as a "lender of last resort". Fiscal union, while the only long-term answer, cannot allay the immediate panic. But it is only once a framework for closer union is in place, with clear mechanisms to force members to maintain their austerity programmes and thereby limit the risk of German liabilities, that discussions can begin.

It is difficult to gauge the long-term implications for Britain of such seismic shifts in Europe. But in the short term, there is an opportunity to play a constructive role, for once. When David Cameron meets Mr Sarkozy today, the stability union will be high on the agenda. He must rise to the occasion. So far, the Government has pursued a typically contrary course, calling vociferously for swift action, while refusing direct involvement and, at home, talking up the prospect of repatriating powers to Britain. It is time for the Prime Minister to change course.

Ultimately, eurozone countries will have to pay to save the euro: the over-indebted with grinding austerity, the Germans by acting as de facto guarantor for others' debts. Berlin's seemingly reckless delays are an understandable attempt to ensure the risk to Germany is minimised. Whether there is time for such manoeuvrings is a different – and highly alarming – question. But the only sensible course for Britain is to offer absolute support.

In the end, the UK faces a tough choice on Europe, one of far greater subtlety and implication than Eurosceptic arguments in general allow. But such concerns are for another day. Now, Mr Cameron must stop carping from the sidelines. He must stop all talk about the repatriation of powers. He must throw his weight unequivocally behind efforts to save the euro. As Sir Mervyn has made abundantly clear, the crisis is of historic proportions. In the face of it, the Prime Minister must act the statesman.