EU to sink or swim in debt crisis

EU to sink or swim in debt crisis

28th October 2011, Comments 0 comments

The European Union has had a rough-and-tumble ride at times, but the two-year euro crisis sees it facing its worst nightmare yet.

Brussels -- Europe's debt crisis sees the 60-year bloc at a crossroads -- poised to tumble like a house of cards if it fails to fix its problems, or find a fresh lease of life by choosing the road of federalism.

"If the euro fails, then Europe fails," German Chancellor Angela Merkel warned Wednesday, hours ahead of a crunch summit held to resolve the debt crisis and restore worldwide confidence in the stability of the eurozone.

Credited with underpinning peace and democracy on the continent for more than half a century, the European Union has had a rough-and-tumble ride at times, but the two-year euro crisis sees it facing its worst nightmare yet.

With rightwing populist parties on the move in nations such as Finland and the Netherlands, eurosceptics are making gains across the 27-nation bloc.

IMF Merkel

German Chancellor Angela Merkel (L) talks to Head of the International Monetary Fund (IMF) Christine Lagarde.

British Prime Minister David Cameron this week faced his largest rebellion ever over calls to quit the Union.

The failure of Europe's leaders to tame the crisis, now threatening leading economies Italy and Spain and knocking at France's door, has meanwhile boosted confidence in national currencies among the 10 EU members not part of the eurozone.

"Right now in Sweden, the support for the Swedish currency has probably never been so high as it is now," Sweden's premier Fredrik Reinfeldt said this week. "At the moment, we are very far from entering the euro."

At the beginning a community of six -- Belgium, France, Germany, Italy, Luxembourg and the Netherlands -- the EU totalled 15 members in 2004 when it began embracing former communist states stranded for half a century by the political divide of the Iron Curtain.

In the euro-euphoria of the 1990s, border posts were mothballed under the Schengen treaty allowing free travel. The single currency was launched the same decade.

But passion for the EU has since subsided.

Efforts to give it a stronger political voice through a single foreign or defence policy have flopped, most recently in Libya, and dreams of further federalism are mired in criticism over Brussels diktats and the power of the EU big two, France and Germany.

And now, the worst economic disaster in the Europe Union's history threatens to drive a rift between the non-euro and euro nations, known in Brussels circles and among themselves as the "ins" and the "outs".

As the 17 countries that have adopted the euro forge closer economic links as a response to the crippling crisis, Cameron cautioned last weekend against crucial decisions being taken without all 27 EU members.

"There is a danger ... that as this eurozone coming together happens, there is a risk that those countries outside the euro ... might see the eurozone members starting to take decisions that affect the single market," said Cameron.

"There are only two options," agreed Finland's Europe Minister Alexander Stubb. "One: further integration. Or two: split up."

Germany currently is fighting for further integration, demanding changes to the EU's Treaty rule-book to tighten budgetary discipline and economic governance.

"The fundamental weaknesses and holes in the construction of the economic and monetary union must either be addressed now or, I say, never," Merkel told German MPs on Wednesday.

"And if we address them now, then we will have seized the opportunity this crisis presents us. Otherwise we will have failed," she said.

Analysts agree.

"Either European leaders succeed in re-energising European integration or the EU will lose relevance for its citizens and become marginal as the principle instrument of shaping their future," said Janis Emmanouilidis of the European Policy Centre.

Claire Rosemberg / AFP / Expatica

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