The euro - source of friction or unifying force?

Euro coins in a till
Image caption The euro's formerly glittering future now looks rather gloomy

And so it is not to be. Or at least may not be.

The vision of the founders of the euro was a grand one.

The new currency would knit Europe together in a way that mere pronouncements and political arrangements simply cannot.

Economists warned German Chancellor Helmut Kohl that the currency simply could not work, because a monetary union in the absence of a fiscal union was inherently unstable.

Profligate nations would use the low interest rates to overborrow, and the edifice would come tumbling down.

Kohl was dismissive and told the small-minded economists that the euro was not about economics, it was about war and peace, about creating a Europe that would never again go to war.

The more sophisticated - or less visionary, take your pick - knew they were taking a gamble.

But they believed that, unlike the United States of America, where political union preceded monetary union, Europe could do it the other way around.

And they may yet be proved right if Germany finally proves willing to trade financial support for the South in exchange for greater control over the finances of eurozone member countries.

All affected

But in the meanwhile the euro has proved a source of friction, rather than a unifying force.

Germans resent being asked to send their tax dollars to countries they see as profligate malingerers, unwilling to work hard.

Image caption Germany's Mrs Merkel has smelt the coffee

The Greeks chafe under restrictions imposed by euroland bureaucrats who they have not elected, and stir up World War II resentments about German theft of their gold.

The Italians, one of the founders of the euro, feel that they have been relegated to the second division.

France is flirting with a lurch to the right as a response to the newly imposed austerity, designed to achieve a difficult-to-comprehend goal of satisfying the hated rating agencies.

The institutions of the eurozone are under strain, with the European Central Bank being asked to violate the Lisbon Treaty by becoming a lender of last resort.

Governments are falling all over euroland: Italy, Spain, Ireland, Portugal have or are soon to have new governments.

The 10 non-euro countries know they are now not part of the major decisions being taken for Europe, even though they are affected by them.

Tightly knit Europe

Hardly the harmony that the founding fathers of the euro had in mind.

But that does not mean that their vision will in the end prove flawed.

For one thing, the turmoil has led to a call-up of financial reserves, not military reserves.

For another, it is increasingly clear that in the end the founders might just come through as winners.

It is now clear to all who will see it, including Germany's Mrs Merkel, although not yet her voters - that as she puts it: "If the euro fails, Europe fails."

Germany is not prepared once again to stand alone as the dominant power in Europe, and so will do what it has to do: agree to support the troubled countries in return for control over their tax and spending policies.

It won't be done so baldly: that is not the way of the eurocracy.

But a more tightly knit Europe is surely the end game.

Irwin Stelzer is a senior fellow and director of Hudson Institute's economic policy studies group.

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