The hour of Europe?

Likewise, the frequent rejections of EU treaties in referendums are a blow to Euro-enthusiasts, but it is not so surprising that electorates vote against complex treaty modifications, especially when there is no financial incentive to vote yes. The reality is that supranational institutions are very unlikely to be popular in a climate where most people take a very dim view of politics in general.

This is not to dismiss the importance of conflicts and votes but the current financial turmoil is much more of a real crisis for the EU. Its primary raison d'être (for a post post-war generation) is its ability to control and constructively exploit globalisation. European leaders from Jacques Delors to Tony Blair have constantly used this refrain and it has been internalised by elites and middle classes. This was also a primary motive behind the creation of the euro.

The realities of interdependence

So make no mistake about it, the current volatility poses a fundamental threat to the European Union on two levels.

If it proves impotent, a vital plank of its legitimacy (which is not synonymous with popularity) will have been undercut.

More concretely, the danger is that financial meltdown will put excessive stress on the (disparate) group of Eurozone members and its weak coordinating structures. European integration has worked through spillover: a form of chain reaction in which integration in one sector leads to integration in others. This dynamic can also apply in the opposite direction.

The financial crash is also an opportunity of immense importance and this crisis in many ways supports the integration argument. The turmoil has very starkly illustrated the realities of interdependence. This has led even the most Euro-sceptic UK newspapers to criticise unilateral actions like those of Ireland and Germany (who are, after all, only exerting their sovereign and democratic rights) in previous weeks. Intense pressure within Iceland for EU and euro membership is one illustration of how the gravitational pull of the EU is heightened in a time of chaos.

While a core EU argument is that it is necessary to bind together to ensure economic security and global influence, (because size, weight and power are still crucial), Iceland was often held up as an example of how small countries can benefit from globalisation by being non-attached and flexible. This was indeed the case in a period of general economic growth and liberalisation.

However, when a crisis comes smaller countries are left hopelessly exposed, with no real substantive instruments vis-a-vis global economic forces, and they are dependent on the goodwill of others. The latter has been in short supply. Thus, as reported in EUobserver, even though there is acute resentment in Iceland at European states' reluctance to help it, it is being drawn towards the EU.

Both threat and opportunity

In brief, this is the biggest crisis the contemporary EU has faced, and (as always) it is both a threat and an opportunity.

If the EU can act effectively it will greatly reinforce its legitimacy and reinvigorate the dynamic of "ever closer Union." On the other hand if it proves useless in resolving this current crisis it will have suffered a grave blow indeed.

The signs thus far have not been promising, but the coordinated Eurozone action since Sunday, following the UK model, is a first step towards stabilization and the doomsday scenario has now faded. There is a keen irony in the fact that the UK, which has lectured other European governments for so long on de-regulation, is now tutoring them on how to solve the resultant problems. They do say poachers make the best gamekeepers.

More seriously, after stabilisation is achieved the debate over longer term policies must begin. The chaos created by an era of self-regulation provides an opening for the creative use of public power to manage markets and support stability and development.

Patrick Holden is a lecturer in International Relations at the University of Plymouth. His book 'In Search of Structural Power,' will be published by Ashgate in January 2009.