Whatever euro's fate, Europe's reputation savaged

By Peter Apps, Political Risk Correspondent

LONDON (Reuters) - Whether the euro lives or dies, the chaotic way Europe has tackled the crisis could undermine the region's geopolitical clout for years to come and leave it at a distinct disadvantage in a rapidly changing world.

With an apparently never-ending series of last-minute summits and telephone calls, Europe's leaders and finance ministers have held the bloc together in the face of growing strains between states, a rising political backlash and market alarm.

But with hindsight, outsiders say each measure proved too little, too late. US officials in particular complain European leaders have either failed to grasp the scale of the problem or proved unwilling to countenance the awkward political decisions necessary to fix it.

As a result, they say, what should have been one of the most stable parts of the world has now become one of the most unpredictable.

At one extreme, the euro area might be about to embark on a journey towards further fiscal and political union as an almost totally unitary "super state". At the other, it could unravel and collapse into an unstable mess of regional rivalry.

"From almost every conversation I've had in the last year - with Chinese, with Indians, with just about anybody - the message is always the same," says Fiona Hill, a former senior officer for the US National Intelligence Council and now head of the Europe program at Washington think tank the Brookings Institute. "Europe can no longer be trusted. It seems to be moving from being a source of stability to a driver of instability."

Long-held certainties were being challenged, she said. Even non-euro member Britain suddenly appeared at risk of breaking up, with Scotland due to hold a referendum on independence that experts say could yet go either way.

The slow burning euro zone debt and banking crisis is accelerating. Last weekend brought a decision by euro zone political leaders to bail out Spain's banks. This weekend Greece holds a parliamentary election which many observers fear could spell the end of its euro membership.