Herman Van Rompuy, the EU President (actually, President of the European Council), has helpfully said that the EU is in a “survival crisis”. Like the rest of us, the Euro has so far ignored him, which is good, because the EU is not facing an imminent survival crisis: Eurocrats are just trying to badger the Irish into tapping the bailout fund sooner rather than later, because that would supposedly calm the markets (how is not immediately clear to me since we all know that the fund is there to be tapped), and to get member states to agree on a permanent bailout mechanism. So this statement is political. (Incidentally, I am not sure the bailout mechanism is a good idea — there is a lot to be said for constructive ambiguity when it comes to bailouts, doing a bailout when you have to but saying that you won’t do one again. European politicians love creating systems so much that I haven’t seen any sign that this point has been considered.)

In fairness, the EU does face a survival crisis, but not one that is going to erupt, or be solved, in the next few days. Germany is determined to keep its external surplus, and thus the PIIGS must keep their deficits; the Euro is not inclined to be weak, thanks to the ECB’s tightening stance; Germany will not tolerate domestic inflation; so the PIIGS must have deflation in order to bring the system back into balance. The crisis will come when local populations realise how long and painful this deflation will have to be, and that leaving the Euro would allow them to avoid it by devaluing. That would likely wreck the banking system, because its debts would still be denominated in Euros. But as is becoming increasingly clear, Ireland’s banking system, at least, is wrecked already.