The prospects of the Eurozone crisis being stemmed any time soon appeared slimmer than ever after Italy's positions on international financial markets worsened sharply.
Although Greek politicians finally managed to agree on a new prime minister after four days of talks, controversial statements by European officials have only fanned the already growing concerns about the future of the 17-nation euro area and the EU project itself.
In the past two years, the Eurozone has had to bail out Greece, Ireland and Portugal due to their excessive sovereign debt levels, but failed to prevent the crisis from spreading to other members of the club. Many have blamed this on foot-dragging due to a lack of enough political will to deal with the problem.
But with Italy, the third-largest economy in the area, now viewed as likely becoming the next candidate for a rescue, the situation has worsened dramatically. Similar fears have occasionally been raised about Spain, next on the list of the Eurozone's biggest economies.
In an apparent attempt to calm mounting concerns, EU President Herman Van Rompuy reaffirmed the 27-nation bloc's commitment to restore financial stability in the euro area.
"We are resolutely determined to guarantee the financial stability of the Eurozone, the stability of the Eurozone is also vital for the world economy," he said in Zurich.
Van Rompuy's remarks came amid continuing speculation that Greece could become the first member of the common currency club to be kicked out. Facing a sovereign debt of over 350 billion euros, the Balkan nation has been repeatedly criticised over its failure to fulfill the reform commitments it made in May 2010 in return for its first bailout from the EU and the IMF.
As Greece now needs further international assistance on top of the 110 billion euros approved last year to avoid a sovereign default, the Eurozone leaders agreed on a new rescue package for the country during a summit in October.
Several days later, Greek Prime Minister George Papandreou shocked his country's European partners saying he would call a referendum on the deal. Within less than a week, he both abandoned that decision and resigned from his post on November 6th.
Meanwhile, although there are no legal provisions allowing a Eurozone member to quit or be expelled from the club, EU officials hinted Greece might be kicked out. Under the bloc's Lisbon Treaty, a country may leave the euro area only if it decides to leave the EU itself.
German Chancellor Angela Merkel has been calling recently for amendments to the treaty, aimed at tightening financial rules to allow "a European institution" to intervene when a country does not observe its stability pact commitments.
Some EU analysts are however skeptical that this could happen soon.
"There is no political will for changing the Lisbon Treaty," Lubov Panayotova, head of the Sofia-based European Institute told SETimes, also rejecting growing speculations about the possible breakup of the Eurozone.
"That cannot happen, but individual members dropping out -- yes, maybe," she said.
A select few
Merkel and French President Nicolas Sarkozy, who have been leading efforts to deal with the lingering and deepening crisis in the Eurozone, are now the central figures in a recently formed ad hoc group, dubbed "the Frankfurt Group".
The body, known also as GdF, includes also van Rompuy, IMF Managing Director Christine Lagarde, European Commission President Jose Manuel Barroso, EU Commissioner for Economic and Monetary Affairs Olli Rehn and Eurogroup chief Jean-Claude Juncker.
Informal in terms of its status, the group has already assumed the role of a Eurozone crisis management body, Josef Janning, Director of Studies at the Brussels-based European Policy Centre (EPC), told SETimes.
"The group was created by the dynamics of the crisis, when leaders of Germany and France used the occasion of the farewell event of European Central Bank (ECB) President [Jean-Cleade] Trichet to get together to co-ordinate their response to the ongoing Greek crisis," he explained.
"Merkel and Sarkozy held principal differences over strategy, wanted to bridge these in a way that could win support from the Eurogroup. Also, they wanted the essential institutional players in," he added.
While the creation of the group has been met with criticism by some, who quickly dubbed it the new EU "politburo", Panayotova viewed it as a positive development.
"Given the [institutional] vacuum, it is good to have leaders who are capable of taking the needed clear political decisions and are ready to face the tough consequences for their careers as politicians," the Bulgarian analyst said.
Janning also disagreed that there are any grounds for concerns that the Frankfurt Group could eventually emerge as a top decision-making body in the EU as a whole.
"These concerns are exaggerated. All 17 Euro members are in via their finance ministers," he said. "The Eurogroup as such is clearly emerging as the inner circle of the EU-27, which was in fact decided by all 27 in the adoption of the Maastricht aquis," he added.
He also noted that while the rationale of the European Monetary Union applies to all EU nations, it also allows member states that qualify for Eurozone entry but do not want to join to opt out of it, as is the case with Britain and Denmark. So, they "can hardly complain of being left out" of the Frankfurt Group, Janning said.
A two-speed Europe?
Meanwhile, Sarkozy called for a two-speed Europe, a notion that Panayotova said is imbedded in the Lisbon Treaty.
"In the end, clearly, there will be two European gears: one gear towards more integration in the Eurozone and a gear that is more confederal in the EU," Brussels-based Euobserver quoted the French president as saying during a discussion at Strasbourg University.
He also deemed the "total integration" of all EU nations as "impossible" especially after the bloc's further expansion into the Balkans.
"You cannot make a single currency without economic convergence and economic integration. It's impossible," Sarkozy said. "One cannot plead for federalism and at the same time for the enlargement of Europe. It's impossible . . . We will obviously have to open up to the Balkans. We will be 32, 33 or 34. I imagine that nobody thinks that federalism -- total integration -- is possible at 33, 34, 35 countries."
His remarks came amid speculations that he and Merkel have been discussing ways for revamping the euro area into a possibly smaller and, financially, more integrated club, which German and French officials have been denying.
Sarkozy's words also appeared in dissonance with a statement European Commissioner Jose Manuel Barroso made during a speech in Berlin, in which he reiterated that the Union was founded on the principles justice, equality and rule of law.
"Let me be clear -- a split union will not work," he stressed. "This is true for a union with different parts engaged in contradictory objectives; a union with an integrated core but a disengaged periphery; a union dominated by an unhealthy balance of power or indeed any kind of directorium."
Barroso also suggested that all EU nations should adopt the euro as their national currency.
"So the challenge is how to further deepen euro area integration without creating divisions with those that are not yet in it," said Barroso.
However, recent developments appear to have further deepened the rift between the Eurozone members and the other ten EU nations that have not joined. Media reports cited the fact that the finance ministers from the two groups held their own separate dinners at different places in Brussels.
"Unfortunately, what we are seeing in recent months is that solidarity, one of the fundamental values of the Union, is being increasingly eroded and is more and more frequently missing," said Panayotova. "Things are not going in the right direction".
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