New Year speeches voice fears on future of Europe

"In a few hours it will be exactly 10 years since many of us at just around midnight withdrew our first euros from a bank machine. Since then, the euro has made our lives easier and our economy stronger," she said on national TV on 31 December.

She linked the fate of the currency to the fate of the Union itself.

"We must never forget that the peaceful unification of our continent is a historic gift. It has given us over half a century of peace, freedom, justice, human rights and democracy ... You can rest assured that I will do everything I can to strengthen the euro. But this will only succeed if Europe draws lessons from past mistakes. One is that a common currency can only be truly successful if we work together more than ever in Europe."

Her lesson on "working together" comes ahead of intergovernmental negotiations on a new treaty that will transform the Union into an economic federation with one central authority deciding how member states spend their money. A "working group" comprising of diplomats and parliamentary observers is set to resume talks on Friday (6 December).

French President Nicolas Sarkozy used more alarming language.

"This extraordinary crisis, without doubt the most serious one since World War II, this crisis is not over ... To get out of it, to construct a new model of growth, to give birth to a new Europe - these are just some of the challenges which await us," he said.

The theme was repeated all around the continent.

Greek Prime Minister Lucas Papademos said he will fight "not to change the crisis into an irregular, catastrophic collapse, to remain in the euro." Latvian President Andris Berzins urged fortitude "no matter how radical the scenario which occurs." Estonian President Toomas Ilves warned: "We have no idea whether Europe, coveted by us for so long, will bring us salvation or vexation."

Leaders warned there will be more spending cuts, more taxes, less welfare and a growing threat to liberal values.

"The fat years are behind us. We must prepare ourselves for some lean years," Danish Prime Minister Helle Thorning-Schmidt, who took over the rotating EU presidency on 1 January, said.

Amid a rise in far-right movements in several EU countries, she noted that "the Denmark we love" is "a country for the many and not for the few. It is a country based on diversity."

Merkel also devoted a large part of her speech to condemning a neo-Nazi fraternity exposed in December for having murdered nine people of Turkish and Greek origin in recent years. "It is our duty to defend the values ​​of our open and free society," she said.

The New Year's messages voiced optimism the euro will pull through. But the villains of the crisis - bankers and profligate former leaders - got bloody noses despite the festive season.

Italian President Giorgio Napolitano described ex-prime-minister Silvio Berlusconi's legacy as one of "corruption and parasitism, of widespread lawlessness and even criminal pollution ... [of] massive and unjustifiable tax evasion."

Sarkozy told bankers they will be made to "repair the damage they have done ... It's a question of justice. It's a question of morality. A tax on financial transactions must be put into force."

And even British leader David Cameron - who just three weeks ago shocked the Union by vetoing an EU Treaty change in the name of protecting London's financial markets - fell in with the popular mood.

"While a few at the top get rewards that seem to have nothing to do with the risks they take or the effort they put in, many others are stuck on benefits, without hope or responsibility. So we will tackle excess in the City just as we're reforming welfare to make work pay and to support families," he said.

Correction: This story was altered on 9 January 2012. The original said that Vaira Vike-Freiberga is the president of Latvia. In fact, it is Andris Berzins