4

Europe’s Narrative Struggle

MADRID – The start of any year invariably prompts stocktaking, and 2012 certainly offers much to consider: the dramatic events in the Middle East, leadership change in China, and the brinkmanship of America’s budget debate. All were high in importance, if not always in popular interest. That seems especially true of the painful and excruciatingly prolonged – indeed, still ongoing – process of saving the euro.

The euro’s survival in 2012 – if only by the skin of its teeth – confounded skeptics who forecast Greece’s exit from the eurozone and the single currency’s collapse by the end of the summer. Indeed, the European Union’s future still seems acutely uncertain, owing mainly to a mismatch between rhetoric and reality.

In the realm of reality, the latest of many “grand” summits in Brussels has left a yawning gap between Europe and a fiscal union, as heads of state stripped much of the substance from the blueprint proposed by Herman Van Rompuy, the president of the European Council, and developed by the European Commission.

Nonetheless, concrete and positive steps toward institutional consolidation – though far from achieving the ambitions of some – have been taken. The creation of the European Stability Mechanism, the European Central Bank's new supervisory role, and the ECB’s purchases of sovereign bonds over the course of the last year have provided much-needed relief to Europe’s beleaguered peripheral economies. Moreover, Europe is one step closer to a full-fledged banking union.