Greek Prime Minister Antonis Samaras begged his minders in the Eurozone for more time to institute austerity policies, asking German Chancellor Angela Merkel for “time to breathe.” That may not be forthcoming. The troika (the EU, IMF and European Central Bank) will write a report in the coming month that will determine whether they continue granting Greece tranches of the bailout agreed to earlier in the year. Germany and France have basically agreed that the reform targets must be met. And it does not look like they will grant an additional two years to Greece to meet those targets. The chances of a Greek exit from the Eurozone have definitely gone up; if they are denied future bailout funds, I don’t see how it could go any other way.

But in some respects, the focus on Greece is a bit of a sideshow. The European economy is due to bottom out regardless of Greece’s position. Manufacturing continues to contract, and gross domestic product has either flatlined or gone negative in most countries in the currency union. A recession is expected for the third quarter of the year, with a greater contraction – around -0.5%, compared to -0.2% for the second quarter. Worse, capital flight out of Europe continues at a disturbing pace.

Insurance giant AIG startled markets last week when it signaled its waning faith in the euro by moving tens of millions of dollars worth out of the currency zone, reducing its holdings in banks in Germany, France, Spain and Italy.

The news came on the heels of a similarly unsettling announcement by International Airlines Group, the parent company of British Airways, which said Aug. 3 that it had reduced its exposure to Spain and formed a committee to prepare for the worst-case scenario of Spain exiting the euro zone.

The one-two punch is the latest in a series of efforts by corporations, central banks and individuals to move money out of crisis-stricken euro-zone countries as the debt crisis envelops an ever-larger part of the continent.

Such currency moves are bets on the future of national economies. The recent capital flight, analyst say, is a vote of no confidence in the euro that some worry could snowball into a series of silent bank runs. If institutions and consumers lose faith in the euro, a massive flight could lead to economic collapse.

Perhaps Germany and its partners derive some psychic benefit from punishing Greece. But they are hardly the problem at this point. The whole of Europe is sick and slipping into an economic hole from which they will be hard-pressed to extricate themselves.