Top German and French officials  (the vague term offered to readers by Dutch news station NOS that did not regard mentioning names a must) do not expect EU leaders to agree on substantial measures, substantial being a substitute for action that brings positive consequences lasting longer than a fortnight.Pessimism abound, yet there is some reason for slight optimism. Reason 1: Reflection. When, in October2010 inDeauville, the European Council agreed to involve private sector involvement as a mean of writing of debt (under immense German pressure), a balance was struck only because France saw one its demands met in weakening (semi)automatic sanctions for budgetary-rule trespassers. Neither made much sense, especially not considering the circumstances. Lenders, wary ofGreecegoing bust, faced increased uncertainty if debt was to be restructured; markets could expect more political games when decisions on budgetary sanctions would end up in the hands of politicians.

Reason 2: Realization. Market will not be tricked, not by EFSF schemes propped up to a trillion Euros by fancy terminology (not to mention financial instruments much despised when in the hands of bankers), nor by promises of political reform that either face months, if not years, of implementation or that are unlikely to get through parliaments anyway. Especially Merkel & Sarkozy finally seem to have grasped this aspect of reality.

Everyone that has set their hope on the survival of the European Monetary Union turn their faces towards this week’s EU Council, which has been preceded by a number of meetings (most notably a meeting of leaders from France, Germany & Italy) to steam line the objectives and decision making, a result of which was revoking a demand by Germany that countries be dragged to the European Court of Justice when budget rules are ignored: National courts will decide on the matter if a country has or has not broken any rules, and the European Court of Justice will step up only when ‘the golden rule’ (from a European Union perspective) has been broken. (A golden rule being a crude hawkish-fiscal rule that allows governments to lend money only to as an instrument for investment, i.e. not to keep up the current level of spending if there is no future benefit). In return,Francewill drop its case for Eurobonds, undoubtedly to Merkel’s great relief.

Now what?

The Economist dubbed its article: The Future of the EU: Two-speed Europe, or two Europes?. It starts with quoting Nicolas Sarkozy:

“You cannot make a single currency without economic convergence and economic integration. It’s impossible. But on the contrary, one cannot plead for federalism and at the same time for the enlargement ofEurope. It’s impossible. There’s a contradiction. We are 27. 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.

So what one we do? To begin with, frankly, the single currency is a wonderful idea, but it was strange to create it without asking oneself the question of its governance, and without asking oneself about economic convergence. Honestly, it’s nice to have a vision, but there are details that are missing: we made a currency, but we kept fiscal systems and economic systems that not only were not converging, but were diverging. And not only did we make a single currency without convergence, but we tried to undo the rules of the pact. It cannot work.

There will not be a single currency without greater economic integration and convergence. That is certain. And that is where we are going. Must one have the same rules for the 27? No. Absolutely not [...] In the end, clearly, there will be two European gears: one gear towards more integration in the euro zone and a gear that is more confederal in the European Union.”

In stating that it is strange to create a single currency block without asking oneself the question of its governance Sarkozy hit the nail on the head. But the head has been getting rusty of late, and we will again face the national parliaments fighting a continental (if not global) issue, on national territory. Two key questions: Can the Eurozone come up with a new treaty without dividing the current set-up, i.e with the other member states ratifying the changes, and how will debates about national sovereignty delay the fight for economic survival?

These two key questions are framework questions, in the sense that they relate to the European Council in one way (countries devote themselves to change, or not), while ratification is a process that makes any definite document a story we’ll probably still be discussing at Christmas. Sarkozy made it a public secret that they expect little resistance from non-Euro countries, lest they a new body politic outside the EU’s realms.

This message was partially aimed atBritain, not a country I would expect to block any deal that could salvage a broken economic zone. If anything, British politicians were quicker to realize and stress that federal steps need be taken. That it is in their own self-interest (the financial sector inLondonhas borrowed heavily to peripheral EU regions and profits from the EU/Eurozone’s lack of internal boundaries) to do so, should matter not. Shooting the messenger is an action well practiced inEurope, but of ill-use in constructive politics.

Constructive EU politics meets two demands: There isBritain’s (andDenmark’s) call for further market integration, regardless of whether a nation state wants to join the single currency zone, and then there is the federalist claim (or dream) that props up power inBrusselsinstitution. To prevent the whole project from collapsing, an open minded stance from those participating in what has already become an exclusive gathering (the Euro-summits, set and bound to increase in frequency) is an absolute must. The single market is arguably the most important result of a project we started about six decades ago.

Joining the European Union means a nation state has to enter the Monetary Union as well, which has two preparing phases to enable a country to adopt the Euro as their currency in the third phase.DenmarkandBritainare the opt-outs. If the Eurozone changes, it must be questioned whether states ready for accession (or that have already joined) can still be ‘forced’ to adopt the single currency when a new federalist-oriented set-up is about to be introduced.

If nothing in this area changes, I see only one option for a more federalist approach: Centralize oversight in the European Commission, as part of the EU-institution. This, of course, will mean that non-Eurozone EU citizens might work on economic issues stemming from regions they do not, or barely, identify with. Yet this is already happening, and the supposed (I say supposed, because I do not believe in ideological neutrality) neutrality of the Commission should, in this case, be enough to prevent this ship from sinking.

A Eurozone outside or next to the European Union seems unworkable to me, especially due to the ticking market-clock, but also because it would do well to preserve the political good-will of your neighbours, to which isolation in important issues can hardly do any good. In a matter of days the next predictions based on the upcoming Council will flow out. Lets hope our currency survives its aftermath.