There is no knowing how long we will have to wait for the calm after the storm, but in the wake of a searing summer which finally proved to be less of an ordeal than expected, we can look forward to an autumn that will continue to be hot for the euro, but one that promises to be more manageable and better managed.

After two years of agitation, European leaders have regained their composure and are ready to adopt a rational and more balanced approach to the crisis.

Having said that, extremism, dogmatism and populism are unlikely to disappear while the economic recession and the high rates of unemployment which sustain such viewpoints continue to prevail.

In Germany, the Bundesbank and part of the Bundestag are still aggressively holding out for an absolute orthodoxy, a position that that they are willing to defend against against all comers including the European Central Bank (ECB). However, debate in the country will likely be more nuanced now that Angela Merkel appears to be convinced that she will have a better chance of obtaining another term as chancellor if the euro is still here when she is up for re-election in September 2013 — not surprising when you consider the massive shock and highly unpredictable consequences for Europe and the world that could result from the collapse of the euro

Pragmatism rules

And the German chancellor is not the only convert to the cause of pragmatism. Even Finnish Prime Minister Jyrki Katainen, who previously demanded additional guarantees from Greece before releasing financial aid, has now taken to talking about “deeper integration and not the opposite”, which will be needed to reinforce the euro.

In the discipline oriented Netherlands, the socialist leader and probable winner of elections slated for September 12, Emile Roemer, who is outspoken in his criticism of austerity, has pledged that he will not reduce the country’s budget deficit to less than 3 per cent of GDP before 2015, which will effectively postpone the country’s commitment to do just that by two years.

Does this mean that the club of countries in favour of austerity, budget cuts and recession are about to back away from their position? No. Neither Berlin, nor its northern allies, nor Mario Draghi’s ECB intend to reduce the pressure that they believe to be necessary for the restoration of the stability, cohesion and credibility of the eurozone.

Greek charm tour

Nonetheless, they all appear to be ready to acknowledge the reality of the unfair cost of the crisis for certain countries like Italy, which has yet to weigh on Germany, the Netherlands and France.

Taking advantage of the shift towards a more realistic and constructive climate, on August 22 Eurogroup President Jean-Claude Juncker travelled to Athens to meet with Greek Prime Minister Antonis Samaras, who will be visiting Berlin on August 24, before going on to Paris on August 25.

In the meantime, François Hollande and Angela Merkel are to meet for a tête-à-tête in Berlin on August 23. Once it has been established, as appears to be the case, that there will be no question of a Grexit, which would undermine the integrity of the single currency, sooner or later a solution will be found — in the context of the one that was agreed for Spain, and at a time when tensions over the fate of Italy appear to have abated.

On guard

Having said that, the eurozone will have to remain on guard. The situation of the single currency is far from healthy. On the contrary, until now favourable circumstances, and in particular political circumstances, have allowed France to escape contagion from the Mediterranean. However, the country suffers from the same symptoms as its southern neighbours, and it urgently needs to embark on a credible course of therapy before the markets decide to call its bluff.

For the moment, we have seen little of François Hollande. However, his weakness and the weakness of his country could disqualify him from playing a more dominant role in any argument over the surrender of budgetary sovereignty — or fiscal union as it is termed in Brussels — which Germany has made a condition for its continued solidarity with the rest of the eurozone, which will be necessary for the survival of the single currency.

Be that as it may, the return to a more reasonable approach virtually everywhere in Europe should allow for cautious optimism. But not to the extent that we will no longer have to worry about a number of potential hazards, chief among them the French Achilles’ heel, which may still have a major impact on the destiny of the euro.