In 2002, former British Prime Minister Margaret Thatcher warned that building a European Union superstate “will seem in future years to be perhaps the greatest folly of the modern era.” Less than a decade later, she’s being proved right, as the EU faces the biggest crisis in its history.

Last week, Eurozone leaders hammered out a makeshift deal to significantly expand the $600 billion European Financial Stability Fund -- seemingly calming fears of a Greek default on billions in public debt. But on Monday, Greek Prime Minister George Papandreou announced a referendum on the EU’s bailout package -- sending shockwaves across the continent and the globe.

In all likelihood, Greek voters will reject the EU deal; unless Germany, France and others decide to come up with an alternative offer, this will inevitably force a Greek exit from the Euro -- and almost certainly start the unraveling of the single currency in its current form.

The Greeks have largely dug their own hole of despair after years of excessive public spending and borrowing (as well as over-regulation of their economy). Several other Euro countries are in the same boat, including Portugal, Spain and even Italy, the EU’s third-largest economy.

But it is only right that the Greek people have the final say in deciding their own future; in any case, no amount of German-funded bailouts will rescue Greece from financial collapse. In fact, the promise to hold a referendum is practically the only major decision the Greek government has got right in the past decade. It will no doubt spark calls for popular votes on the EU across Europe.

From its inception, the 17-country single European currency has been an inherently political project, designed to artificially unite a diverse group of nations stretching across southern, central and northern Europe. It has in practice served to artificially push down interest rates in traditionally high-rate countries, leading to excessive borrowing and the current debt crisis.

The Euro is a spectacularly misguided attempt at a currency union in a sea of nation-states with different national interests, languages and stages of economic advancement. It was always doomed to fail in its current form; Great Britain, Sweden and Denmark were wise to keep out when it was first launched back in 1999.

The huge difficulties facing the Euro are symbolic of the deep-seated problems enveloping the European Union today. Chief among them is a lack of economic freedom -- thanks to over-regulation of businesses, high tax rates and massive welfare spending as well as heavily protectionist measures (such as the Common Agricultural Policy) that limit free trade outside the EU.

The troubles also reflect the fundamentally undemocratic approach taken by the Eurozone leaders, who have foisted a dangerous economic experiment upon their own people without popular consent. Not a single Eurozone country has held a popular vote on its membership in the European monetary union. This huge “democracy deficit” is now bringing the continent to its knees.

Europe needs greater national sovereignty, economic and political freedom and democratic accountability. The “European unification” project fails to deliver on all three counts, and the collapse of the Euro is a powerful symbol of that reality. Europe’s long-term prosperity can only be secured if its nation-states can decide their own destiny, each with the mandate of its own people.

The grand vision of a unified federal Europe is rapidly turning into a nightmarish specter of economic decline, with mounting tensions between European leaders, and increasingly disillusioned electorates. The impending Greek collapse is merely a symbol of a rotting political system dreamed up by European elites who have acted for decades with a reckless and dangerous air of impunity while feeding at the trough of socialist economic planning.

Nile Gardiner is the director of the Margaret Thatcher Center for Freedom at The Heritage Foundation.