Over the next two days, European leaders will gather for yet another critical summit in Brussels. They'll try to come to an agreement to boost European growth, save Spanish banks and relieve financial market pressure on Spain and Italy. Each national leader will also face a trade-off that involves sacrificing sovereignty to get economic stability.
Stephan Richter, publisher and editor-in-chief of the online magazine The Globalist, calls this "a true Primo Levi moment," referencing the Italian writer who survived the Holocaust and wrote the novel If Not Now, When?
"If not now, when will we do the right thing?" asks Richter, who says the right thing for those who want to save the euro and steady Europe's wobbly economy is to get on with the task of bringing nations closer together in a sort of United States of Europe.
This week a group of European heavyweights, including Mario Draghi, president of the European Central Bank, presented the leaders with a 10-year plan to create a stronger union between the European nations.
The plan calls for taking immediate steps toward a genuine economic and monetary union, including the creation of Europe-wide banking regulation and deposit insurance and the sharing of the region's debt burden.
France, Italy and Spain support the plan. But Germany, which would end up holding the bag for Europe's bad debt, continues to balk.
Richter predicts German Chancellor Angela Merkel will insist that other countries demonstrate they're making real reforms to improve their economies and show her they're willing to surrender significant control over their national budgets — the power most dear to national parliaments — to federal institutions in Brussels.
Jacob Kirkegaard of the Peterson Institute for International Economics says that amounts to surrendering sovereignty, which nations seldom do willingly.
"Historically, this has always been associated with the direct threat of military invasion, or in the case of the euro area, the direct threat of a financial and political calamity," Kirkegaard says.
Creating A Road Map
Europe is facing its share of financial and political turmoil right now. Mutualizing the euro area's debt so that each country's share would be backed by its partners would ease the worries of the financial markets.
But Kirkegaard says such a grand bargain is "simply politically impossible." On Tuesday, Merkel told German lawmakers in a meeting: "I don't see total debt liability as long as I live." She added that the pooling of debt could come only with improved oversight and concessions on sovereignty.
Kirkegaard says European leaders will instead create "a road map for how this could happen." The plan would gradually pool national debts as governments gradually give up sovereignty.
But that process will take time, and the financial markets are looking for tangible moves now.
A Point Of No Return?
Nicolas Veron, a senior fellow at Bruegel, a Brussels-based think tank, says the markets are likely to get a big step toward a banking union with the creation of a sort of FDIC, or Federal Deposit Insurance Corp., for Europe.
"The number of pronouncements that have been made in the past weeks by most leaders in Europe signals that the discussion about [a] European banking union is real," Veron says.
He suggests the leaders immediately announce that the European Union's emergency fund, the European Financial Stability Facility, backs the deposits of all eurozone banks.
"It would be a game-changing event in terms of market perceptions of whether the European Union leaders are serious or not about banking unions," Veron says.
The idea may look too much like pooling debt to Angela Merkel. But in the end, Kirkegaard thinks Europe will come together because it has reached the point of no return with the euro.
"It is now infinitely more costly for everyone in Europe to abandon the project than it is to complete it," he says.
Abandoning the euro project would be most costly for the Germans. Its banks are already among Europe's largest creditors. And maybe more importantly, since World War II the country has seen its future in a united Europe.