How sick is the euro?
Over the past few months I and others have explored the flaws in the single currency, but who would have imagined a German chancellor questioning the very survival of the euro?
Or that a majority of Germans now, apparently, want the Deutsche Mark back. Or the warning from Dominique Strauss-Kahn of the International Monetary Fund, that "the whole world is watching... and is losing confidence in Europe". Or Simon Schama, who cast his historian's eye over the continent and discovered the "sinkhole that is the eurozone", forseeing a "lashing out at remote masters". And the countless others who say the European idea has lost its potency. It is, surely, Europe's age of angst.
But to catch breath for a moment: How sick is the patient and why has the medicine failed so far?
Secondly, the massive one-trillion-dollar fund of loans and guarantees to help out others in the eurozone. The figures are eye-watering. For a brief moment the world was convinced. But this was a hastily put together package to satisfy the Monday morning markets. What the fund did not do was to address the underlying problems. Even Chancellor Merkel said "we've done no more than buy time for ourselves".
So what are the fundamental problems? Europe has low growth and future prospects are not much better. Yet within the monetary union they have to slash their deficits. There are mounting fears that as Europe embraces austerity it will lead to a further fall in growth. In a nutshell, Europe could be locked into a deflationary cycle, with years of stagnation.
The great pruning of the public sector has begun. Spain is cutting public sector wages by 5%. Some infrastructure projects are being frozen. In Greece wages in the public sector will be cut by 16%. Pensions will be frozen for three years. Portugal is cutting 5% from the salaries of some civil servants. Italy is considering a wage freeze. The UK is about to administer the pain.
For parts of Europe this will be a cultural revolution. The public sector delivered what people referred to as the European way of life. An axe is now being taken to it. We know how the Greeks reacted to it; the rest of the continent is just waking up to this new world and there could yet be protest and unrest.
Probably the biggest underlying fault-line is that the economies of Germany and say Greece or Portugal are so different, and yet they inhabit the same monetary union. Many economists doubt whether such vastly different economies can be harnessed together. How do you reduce these differences and make the southern European economies competitive?
The fear in Germany is that their hard work will be used to bail out others. As Chancellor Merkel said, "joining the eurozone isn't about creating a financial transfer union".
There are doubts that the one-trillion-dollar mechanism will be enough, but if Germany is asked to put its hand in its pocket again there could well be resistance. Hans-Werner Sinn from the German Institute for Economic Research (Ifo) is quoted as saying that Merkel, in agreeing to support these potential bail-outs, has committed one of "the gravest mistakes in the history of the Federal Republic". Germany is likely to refuse to become Europe's paymaster, and the more others like the French insist, the more the German people will question the entire European project.
So what is the way out?
Most members of the eurozone accept there will have to be greater discipline in the future, with surveillance of budgets and sanctions for offenders. But that does not address the problem of low growth and a lack of competitiveness.
As to the future, visions differ. Germany would like to see the eurozone cast in its own image. In that case it might support deeper integration, but it would want the reforms backed by a new EU treaty. That will not be popular. The EU recently spent eight years haggling over the Lisbon Treaty. And in the case of the UK, any further transfer of power to Brussels would trigger a referendum - if the changes applied to all 27 EU members.
The French are toying with new powerful structures that would essentially set up a European economic government for the eurozone. This would be a giant step towards political union. It would trigger, once again, profound arguments and there would be wide calls for such changes to be put to the people. How the French would vote for such changes is far from clear.
So the old arguments will be had again between those who want ever deeper union and those who want a less ambitious Europe that delivers in the face of competition from the rest of the world.
These are just a few of the known unknowns, but it means that Europe is in for a time of turbulence.
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