German chancellor Angela Merkel said today the euro's troubles offered a chance for the European Union to strengthen its economic and political union, not just its common currency.
Speaking at a ceremony in Aachen where Polish prime minister Donald Tusk was awarded the Charlemagne Prize for furthering European unity, Ms Merkel said the future of the EU was at stake in the challenges to its monetary amalgamation.
"If the euro fails, not only the currency fails. Europe fails too, and the idea of European unification. We have a common currency, but no common political and economic union. And this is exactly what we must change. To achieve this - therein lies the opportunity of this crisis," she said.
In a speech broadcast live on WDR television, Ms Merkel said the crisis over the euro's future was "not just any crisis, it is the strongest test Europe has faced since 1990 if not in the 35 years before.
"This test is existential - it must be passed. If it does not manage to (do that), the consequences for Europe and beyond are unforeseeable," the Christian Democrat leader said.
Despite her concerns, Ms Merkel said she was confident that Europe would overcome the crisis. "The euro is more than just our currency. It is the furthest achievement of European integration so far. It stands for the European ideal. And I stick to my vision that one day, all EU member states will also have the euro as a currency," she said.
Greece's debt emergency and worsening deficit issues in Ireland, Spain and Portugal have eroded the euro's strength.
But Ms Merkel held off on backing a €110 billion bailout for Greece until it was clear contagion was starting to afflict the euro zone, dismaying France over the delay. Germany and France had long been the twin engines of EU integration.
In the decade since the euro was created, Germany has resisted the idea of tightening economic policy coordination, fearful states like France could exploit such a discussion to try to exert influence over the European Central Bank.
Germany was also concerned that its export-reliant economic model could come under fire from EU partners that want Germany to do more to boost long-stagnant domestic demand.
But the contagion crisis has forced Ms Merkel to drop her resistance to closer coordination, inviting recognition that it is the price Germany must pay to win agreement from other EU members to a radical strengthening of the EU's Stability and Growth Pact that Berlin wants.
Both the euro and European sovereign debt have seen erratic swings in their value over the past weeks as leaders agreed massive financial aid packages first to bail out debt-laden Greece, then to buttress the entire euro zone.
The latest step, taken last weekend, saw policymakers from the European Central Bank deciding to buy euro zone government bonds on the open market in a move welcomed by economists and investors as bringing calm to markets.
In a sign the programmes were working, investors were attracted to the European stock market, where shares rose for a second straight session to a one-week high today, also helped by soothing company results in recent days.
But the euro retreated against the dollar today, nearing a 14-month low as concerns rise about the potential impact from the harsh austerity steps to be imposed in some countries as part of the euro zone emergency aid plan.
Reuters