Europeans face historic choice: unite or divide?

Europeans face historic choice: unite or divide?

December 1st, 2011 by Associated Press in Local - Breaking News

A trader reacts as watches his screens at the stock market in Frankfurt, Germany, Wednesday when the German stock index DAX went over 6000 points.

Photo by Associated Press/Times Free Press.

By RAF CASERT and DON MELVIN, Associated Press

BRUSSELS - The European Union rose from the ashes of World War II, a conflagration that pitted the continent's great powers against each other and left scars on the land and the mind alike. And from the start, the question was whether this unique experiment in goodwill would ever become a United States of Europe, where cooperation ranked ahead of nationalism.

Now the time for the decision is at hand. People on the continent face a historic choice that is as much about themselves as it is about their money: Do they see themselves going forward primarily as Europeans or governed as French, Germans, Italians, Spaniards and so on?

The immediate cause of the urgency is the precarious state of the euro, the currency shared by 17 EU countries. It is teetering on brink of breakup precisely because that basic question has never been answered. The euro's woes have shown that, with respect to a currency, halfway integration doesn't work. Diverging national plans have been out of whack with a united monetary policy.

And political leaders have said that if the euro fails, the EU may well follow.

"We have to show that the euro is an irreversible project - an irreversible project," EU President Herman Van Rompuy said Wednesday, using the repetition almost as if to convince himself.

Most experts say Europeans must choose now or the choice will be made for them. Either they will choose to go forward as a community, where rich and poor throw in their lot together, or they will experience greater fragmentation and, potentially, a return of the bitter divisions that have riven Europe in the past.

It is as much a question about identity as it is about finance. And the answer cannot be delayed.

Coming as it did from a man not given to hyperbole - the European Union's monetary chief, the soft-spoken, gray-haired and bespectacled Finn, Olli Rehn - Wednesday's warning was dire.

"We are now entering the critical period of 10 days to complete and conclude the crisis response of the European Union," Rehn said.

Ten days to save the euro. Ten days that will shake the financial world. Ten days to decide how Europeans will go forward.

That critical period will culminate at the end of next week in the EU's year-end summit meeting, a diplomatic dance of the 27 EU leaders that is increasingly orchestrated by two of the global powers that were at the core of the continent's last big war - Germany and France.

The summit could set the course for Europe for decades to come, if and how the euro currency is rescued from two years of increasing instability. After living in denial throughout much of the crisis, convinced their currency was untouchable, even top EU officials realize they are in uncharted territory.

"We also consider the situation as grave, even as dangerous," Van Rompuy said.

The crisis hit like a bolt from the blue on Oct. 20, 2009, when Greek Finance Minister Giorgos Papaconstantinou entered a makeshift room on the outskirts of Luxembourg during a meeting of EU finance ministers and hold a huddle of reporters: "To put it simply, we have experienced a collapse of tax collection mechanisms and an uncontrolled rise in spending."

The euro has never been the same since.

The announcement ended almost a decade of positive news about the shared currency and exposed the Achilles Heel of the entire system. National capitals could still set too much policy at home and count on the fiscal orthodoxy of Germany to present a gleaming picture of the euro to investors.

The announcement also shocked the markets into action. They went after one profligate nation after another, and the euro's stronger nations found themselves having to bail out Greece, Ireland and Portugal.

That was painful enough. Still, with debt totaling between (euro) 150 billion to (euro) 330 billion, rescuing countries that size was manageable.

But when Italy, the continent's third-largest economy, with a debt approaching (euro) 1.9 trillion, seemed to sink into a financial morass over the past weeks, the downward spiral turned into a crisis that could break the eurozone.

And it tested how "European" every nation really was.

Germany was most reluctant to help out those nations that were struggling, arguing they should pay for their mistakes - literally. That inaction has been seen by some as part of the problem the euro now faces.

It was a sea change for Germany and the way it's perceived in Europe.

"I will probably be the first Polish foreign minister in history to say so, but here it is," Radek Sikorski said in Berlin this week, 72 years after German troops invaded his country. "I fear German power less than I am beginning to fear German inactivity. ... The biggest threat to the security and prosperity of Poland would be the collapse of the eurozone."

One option would be to pool resources, a move that would require the eurozone nations to hand over much more economic, budgetary and fiscal authority to a centralized authority that would oversee policy and punish those who failed to abide by it.

To supporters that's the community approach. To critics it reads "Superstate."

Last week, German Chancellor Angela Merkel and French President Nicolas Sarkozy met in the border town of Strasbourg and decided to push for changes to the EU's governing treaties. When they came to the fork in the road, they chose not a breakup but more unity.

"We must take steps toward a fiscal union to express the conviction that we know policies must be more closely coordinated if you have a common, stable currency," Merkel said.

"It is political confidence in Europe that has been lost - we can only win it back politically," Merkel said.

It could mean drastic national changes, even at the heart of Europe in France. Known for its strict, protective labor laws, France might have to change, too, if stricter free-market rules come from Brussels.

It would be music to the ears of French business and an answer to many of its problems.

"The solution exists. It is audacious," said Laurence Parisot, head of the business lobby Medef. "It is called the United States of Europe."

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Don Melvin can be reached at http://twitter.com/Don-Melvin Raf Casert can be reached at http://twitter.com/rcasert