Analysis: Nobel-crowned EU risks future as loveless marriage

Mon Oct 15, 2012 3:55am EDT
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By Paul Taylor

PARIS (Reuters) - The European Union's Nobel peace prize comes just as a realization is dawning that Europe's single currency - the EU's most ambitious project - has survived three years of incessant financial turmoil and is not going to break up.

But having narrowly avoided an acrimonious divorce and the loss of some of its errant children, the euro zone risks a future as an unequal, loveless marriage with frequent rows and the prospect of separate bedrooms.

Two things have become clearer in the last few weeks that were widely disputed before: contrary to prevailing opinion earlier this year, the euro is here to stay and could very probably keep all 17 members and add more in future.

But the euro zone has not yet found a way out of the doldrums of economic stagnation, unemployment and social dislocation that are widening the gap between northern and southern Europe and fuelling Eurosceptical populist movements in many countries.

Three events have changed the outlook for the euro area:

- The European Central Bank put a floor under the euro zone by agreeing last month to buy unlimited quantities of bonds of any troubled member state that accepts the conditions of a bailout program. ECB President Mario Draghi made clear the bank will use all its tools to defeat anyone betting on a break-up of the monetary union.

- The euro zone's permanent rescue fund came into effect last week after months of wrangling and legal challenges, providing a 500 billion euro backstop for countries that risk losing access to capital markets.

- And German Chancellor Angela Merkel signaled by visiting Athens that the EU's most powerful economy wants Greece to stay in the euro area, drawing a line under months of debate in Berlin, notably in her own coalition, about ejecting the Greeks.   Continued...

The European flag flies in front of the European Parliament in Strasbourg October 12, 2012. REUTERS/Vincent Kessler