Is Europe slipping into the past?

Suddenly, Europe seems to be slipping back 350 years. Europe took its modern-day avatar in 1648 after its diverse kings bought peace with the church in 1648 at Westphalia. The eponymous treaty bought for the kings the assurance that the state, not the church, would rule their land.

Warts and all, this arrangement held Europe together till the two World Wars, when the simmering differences exploded with impact far beyond the Continent. Post the Second World War, Europe's leaders went into a huddle to devise a system that would avoid the devastations of nationalism.

The first attempt at uniting the Continent was the European Coal and Steel Community that sought to pool the heavy industries of Belgium, France, Italy, Luxembourg, the Netherlands, and West Germany. These nations, in 1957, extended the cooperation to create by the Treaties of Rome, the forerunner to the European Economic Community. The treaty, which came in to effect in 1958, established a Customs union and the European Atomic Energy Community.

EU, the villain

Since then, the Community has expanded into a borderless European Union with 27 member states, a GDP of over $15 trillion and covering a population of 500 million.

It is the largest exporter and importer of goods and services, and the biggest trading partner to several large countries such as the US, China and India.

The cornerstone of the arrangement was shared sovereignty, but with each country responsible for internal governance. Yet, after 60 years, the deal appears to be unravelling as governments are seized of problems within than without. The European Union is realising that even in this globalised world, politics and economics remain very local.

All that the EU symbolised — a new multipolar international order and the marriage of cross-border interdependence with national politics — could well come to naught. Indeed, as economic problems mount, the EU is seen as the villain. The rising demand for more security in member-states whose people are worried with the EU's policies may make fragmentation more real than imagined.

No longer is Euroscepticism the preserve of Brits, regardless of Germany and France insisting that the euro and the EU are not divisible.

Their governments will, and may, do every thing to keep the single currency going as its failure could well mean the end of the still-in-progress EU experiment, but their people are beginning to question the raison d'etre of the unequal alliance.

Germany's prescription

A lot of blame attaches as much to Brussels for its procrastination on decisions as to problems of individual states, such as the Greek profligacy, the Spanish mismanagement, the Irish home boom or the recklessness of German banks. Brussels refusing to act with alacrity is affecting its credibility.

For instance, the UK wants quick, even if short-term, solutions to pull the Euro Zone back from the brink. London and other capitals have suggested a heftier bailout fund to preempt a financial market contagion, greater deficit spending or underwriting the entire currency union's debt with joint bonds.

But Germany is unrelenting from its prescription of budget austerity. Chancellor Angela Merkel may not be averse to backing job-creation projects, but she wants monetary, fiscal and even political union.

Towards this end, she wants Euro Zone governments to cede some fiscal power to Brussels. But it must be said to Germany's credit that it wants the Union to survive despite the vastly disparate economies. In terms of economic power, there can be really no comparison between Germany and Greece, or indeed the many others.

Sticky, but scoring point

Yet, in times of such gravity, not always can decisions be taken by head alone. One must hear the heart too. While Ms Merkel's austere decisions may be right considering the long term, nation-states have to survive the short term first. This approach is the sticking point in the Euro Zone, and a scoring point for the US.

The US economy is in no great shape, and yet if there is a world-wide shift to the dollar, it is mainly to do with its approach.

The US does not hesitate to throw big money at crisis, not that its economists are unaware of the problems only being back-ended. That it is seen to be doing some thing shores up the sentiment — the chimera that keeps the financial world ticking.

Germany's inflexibility could cause a lot of harm, especially when economic muscle is shifting away from the traditional powers to the emerging nations.

A mis-step by the key Continental powers could hasten the fragmentation of Europe. Not only would this cause a world-wide financial turmoil affecting the smaller Euro Zone nations most, but also turn the clock back on Europe 350-plus years.

Solving the Euro Zone problem will be painful, politically and economically, but is doable still. Brussels showing the political will to do that would more than any thing else revive the waning trust in the Euro Zone.

Can Europe's big powers pull this off?