Could this be the plan?

By R.A. | WASHINGTON

THERE is an inescapable sense that the euro zone is accelerating toward an uncertain and terrible end. At the Financial Times, Wolfgang Münchau writes that the euro zone has but days to save itself. At Bloomberg, Peter Boone and Simon Johnson say that the beginning of the single currency's end is upon us. And of course, The Economistcontinues to warn of the rising possibility of a break-up, and explains how one might occur, in the latest print edition. Everywhere one looks, there are portents of doom.

Except, that is, in the markets. Equities are soaring today, perhaps as a result of technical factors like short-covering but perhaps, some suggest, on hopes that the euro zone is finally rising to the challenge facing it. From whence cometh this hope?

Markets appear to see the prospect of salvation in reports of a new policy approach from Angela Merkel and Nicolas Sarkozy. The two are said to be putting together a framework for a rapid move toward greater fiscal integration. Such a plan would likely entail oversight of member-state budgets—and a corresponding loss of sovereignty—with the understanding that such ties would facilitate the way toward sovereign risk-sharing, as through euro bonds. The prospect of fiscal submission to the will of the euro zone's big powers is unlikely to appeal to peripheral countries, but many have already accepted some degree of oversight in exchange for emergency assistance, and the alternatives are likely to be far worse. To get around the need to go through a lengthy and uncertain treaty-change procedure, the plan may be drawn up along the lines of the Schengen agreement on geographic mobility. Countries may be able to sign on on a voluntary basis; it will not be an all or nothing approach. Given the scale of the current debt crisis, mutualisation of fiscal responsibilities won't fix the mess. The main hope for the plan is clearly that a major step toward better fiscal institutions will encourage the European Central Bank to substantially step up its intervention in bond markets.

The approach has several of the ingredients necessary to resolve the crisis, and it isn't crazy to think that it might represent the beginnings of a workable end-game. Yet significant question markets remain. One concerns timing. The euro-zone crisis is galloping forward. Can enough euro-zone governments arrive at an agreement before critical thresholds are reached? Can and will the ECB hold the single currency together for long enough?

Then of course, there are the pesky details. One supposes that peripheral economies may bite the bullet and sign on. To what, however, are Germany and France actually willing to agree? And Finland and the Netherlands? Is this actually going to be fiscal integration with bite? Even if one assumes that the relevant parties are prepared to throw themselves headlong into true fiscal integration, will that convince the ECB to dramatically increase its interventions? Hang-ups about fiscal institutions aren't the only thing deterring the central bank from broader action, remember; Bundesbank officials are also worried about the statutory limits on the ECB's behaviour. Without explicit orders from governments to act as lender-of-last-resort, the ECB may keep its role limited.

It also seems like greater levels of bond purchases aren't enough to save the situation. The ECB has been buying large amounts of debt, to little avail. Markets are looking for guarantees. Without an explicit promise from the ECB that it will stand behind member-state debt, markets will continue to take ECB buying as little more than an opportunity to dump risky bonds. A lot of moving parts have to move in just the right way for a plan like this to work.

Meanwhile, the backdrop against which this drama is taking place is growing ever more foreboding. The OECD declared today that the euro zone is likely in recession. Its latest projections for growth in 2012 are truly dismal—and probably overoptimistic. Real output may contract in France and Germany over the next year. Italy and Spain also face recession, and Portugal and Greece are looking at very deep contractions. Moody's warned today that all of Europe's sovereign ratings are at risk and that multiple defaults can't be ruled out. It is seen as good news that in an auction of 10-year debt this morning, Belgian yields rose to just 5.7%.

Hope is not yet dead. But markets will soon turn sceptical again as they wait for details to materialise. Unless euro-zone leaders can deliver the goods and fast, it won't be long—mere days, perhaps—before panic is once again ripping the single currency apart.