In 1992-1993, the monetary crisis that hit Europe rendered the European Monetary System (EMS) weak. Since late 2009, the crisis of Greek public finances has been hurting the euro. Same cause - but same consequences?

It is important to identify the causes behind the EMS crisis. In a system where the fluctuation between European currencies is limited to more or less 2.25%, Germany maintains a policy of high interest rates and strong currency that the other member states fail to follow. Speculative attacks against the pound, then against the lira, the peseta and finally against the French franc finally sealed the fate of the EMS, which had a fluctuation band of around 15%. This crisis was part of the reason for the introduction of the euro.

Almost twenty years down the road, the Greek budgetary crisis puts the creation of the euro into perspective. The common currency was meant to provide protection against speculative attacks. Indeed, the sine qua non condition of membership of the eurozone, and of the European Union in general, was - and still is - compliance with the economic stability pact that limits fiscal deficit to 3% of GDP and debt to 60% of GDP. Under Article 126 TFUE (ex-Article 104 TCE), the enforcement of this budgetary discipline falls on the European Commission and the Council of the European Union. In practice, most member states have found it difficult to meet these conditions. In 2003, France and Germany managed to avoid the Commission’s excessive deficit procedure by bringing together a blocking minority, of which Greece, in particular, was a part.

But the procedure against Greece went ahead. Athens was ordered to clean up its public finances and in response it presented a fiscal austerity plan. However, this did not prevent it from falling victim to a major speculative attack, coupled with the decision by several ratings agencies to downgrade the Greek government bonds. The situation is thus rather similar to that in 1992-1993: a crisis of public finances in one - or several - member states, fuelled by a speculative bubble, against the backdrop of inter-country tensions. The question is: does this crisis weaken or strengthen the Union?

Let us recall that the process of European integration has been punctuated by crises. They have always moved the Union towards deeper integration and were in fact at the origin of European progress. Suffice it to mention in this context the Gaullist ‘empty chair’ policy, the Luxembourg compromise or the oft-cited principle of subsidiarity. Should we then not look at the current economic crisis in the same way - and with optimism? I would say yes - and no.

Yes, because the EU has given proof of its ’consolidated’ ability to overcome any obstacle it has faced on its way towards achieving its original – albeit still distant – goal. And no, because this time the crisis is not only internal and there are no mechanisms available to deal with it. And it is exactly here that the challenge lies.

Thus far, we tried to make a distinction between ‘economic cooperation’ and ‘political union’, based on the dubious premise that Europe may be economic without necessarily being political. However, these two issues are inextricably linked to such an extent that they are two sides of the same coin. ’Economic’ cannot be separated from ‘political’, and vice versa. It is therefore time to identify the next step and take it - otherwise we risk jeopardising an achievement without precedent, the acquis communautaire. If a problem is global then its solution must also be so. Failing that, we should at least look for a Community solution. National solutions are no solutions here, since they must advance and serve the common interest and all members of the European ‘legal’ Community must side with them.

Tensions and conflicts are unavoidable. These days the German press is replete with articles critical of Greece. They may be inappropriate, but are certainly covered by the freedom of expression. Meanwhile, the reactions in Greece may be considered disproportionate, but it is also clear that neither side challenges the spirit of cooperation and solidarity. All this proves that in this Community of ours it is tolerated for member states to skid off the track, since it may happen between states, and especially between partners.

Nevertheless, the EU cannot afford to turn a blind eye and attack other problems. It needs to coordinate a response to this unprecedented crisis. The European Commission should play its role and show the way ahead, while the member states should follow its lead - starting with Greece, which has the onerous privilege of being affected to this extent. Ultimately, national sovereignty can only be understood from the perspective of European sovereignty. Without the latter, national sovereignty would not be meaningful in an international context. And in a globalised world, it is only the EU that can assure national sovereignty.

(*) Spyros A. Pappas is a member of the Athens and Brussels Bars and former director-general at the European Commission.