**2011 will be remembered as the year in which, for the first time, the European Union gazed into the abyss and named the unnamable. To the surprise of friends and strangers, inside and outside Europe, just when after a decade of introspection and divisions Europe set out to make up for lost time with its eagerness to become a global player at last, a financial and economic crisis that spanned the globe hit the continent with full force and destabilised its main and most successful achievement: the monetary union.

"If the euro falls, Europe falls," Chancellor Angela Merkel announced to the members of her party meeting in Leipzig in November, describing the situation as “the most difficult since the Second World War." And she was right: the consequences of a breakdown of the euro would be so profound that it would be hard to restrict them merely to the currency: they would hit the internal market and the principal common policies, including foreign policy, full on, sweeping away decades of painstaking European integration.

The “Empty Chair Crisis" in the sixties, the "Eurosclerosis" of the seventies, the shadow of Europe’s economic and technological decline vis-à-vis the U.S. and Japan in the eighties, the return of concentration camps and ethnic cleansing in the nineties, and the failed constitutional referenda in France and the Netherlands in the last decade: the European Union has been in crisis before, but none have had an existential character in the literal sense of the word.**

"Too little, too late"

**What have the consequences of the euro crisis been? The most visible and immediate has the devastation in terms of employment and prosperity, which has provoked widespread wariness about the future of the welfare state. The crisis has also brought into question the democratic self-respect of our societies, subject to market forces over which they detect a lack of control. And although it is too early to outline the psychological impact, history tells us that societies that are afraid and that feel insecure tend to turn in on themselves, become wary of their surroundings, open the door to populism and sacrifice freedom for the sake of greater security.

The weaknesses revealed by the crisis have been equally significant. The monetary union, which aspired to be as sturdy as all those imposing buildings that are depicted in the Euro banknotes but that (a premonition?) in reality do not actually exist, has proved itself incapable of overcoming bad weather, as if it were designed to set sail only under untroubled skies.

And at the same time, the fine but indispensable fabric of the ‘identity’ that holds European integration together has also been torn: solidarity and the community project, anchored as much in a vision of the past as in a vision of a common future, have been undermined and even replaced by the worst prejudices and cultural stereotypes between North and South, East and West, Catholic and Protestant that we thought had been overcome. The management of the crisis that has grown out of all this has been marked by "too little, too late”, which has kept the euro dangling over the edge of the abyss and kept the citizenry on the verge of a heart attack for most of the year.**

Institutions sidelined

**From the institutional point of view, the integration of Europe has also been singularly affected, now that Germany and France have opted for a straightforward and ruthless intergovernmentalism and brushed aside the European institutions (particularly the Commission and Parliament) as well as the so-called “Community method", which traditionally has been the only guarantee of a balance between big and small, rich and poor, North and South.

In extremis, as the year came to a close, the European Central Bank saved the European economy from collapse by flooding the banking market with liquidity. This has proved right all those who claimed that the pressures on sovereign debt were not the cause but the consequence of a financial crisis that, due to errors in design and operation of the euro zone, nearly engulfed the EU itself. The bell of the ECB has saved the EU, at least for the moment. It has not, however, resolved the underlying problems, which are still there and which 2012 will have to tackle.

These include the inability to build a firewall between the euro and the EU that would shield the failure of one from the collapse of the other. For that reason, when the Greeks and the British return to the negotiating table in 2012 the EU will be precisely where it was in 2011: between the rock of a Greek exit from the euro, the consequences of which would be devastating, and the hard place of an irreversible rupture with the United Kingdom, which would threaten the unity of the internal market and weaken the EU’s global standing.**

All eyes will be on Germany

**Nonetheless, the future of Europe will be decided not at the Greco-British periphery, but, naturally, at its core. The German government stubbornly persists in a reading of the crisis that makes resolving it impossible because, as has been shown, the crisis demands a change in the rules governing the euro zone and, most particularly, a new role for the ECB and the issuing of Eurobonds.

In Berlin, Chancellor Merkel has consciously lashed herself not to one but to two masts: the mast of a public opinion highly reluctant to get more involved in monetary union, and to a Constitutional Court that is hostile to European integration. But that legal and public opinion behind which Merkel is hiding is not the cause of her actions, but something that she herself and her party have encouraged, instilling in the Germans the belief, against all empirical evidence, that the euro has not only been a bad deal for Germany but, as the Constitutional Court seems to believe, a threat to German democracy itself.

And so, once the ECB has changed course and resolved on saving the financial system, all eyes will be on Germany, trying to figure out how Berlin will continue to lead Europe on the basis of its doubts, misgivings and fears – or on a constructive and long-term vision of the future of the continent. Forget the Mayan calendar: it is in Berlin where Cassandra will be vindicated or refuted.**