Adrian Hamilton: We shouldn't give up on the euro just yet

International Studies

People worry too much about the euro. Not, of course, the commentators and politicians who never believed in it in the first place and are now revelling in its incipient collapse.

Nor the economists who, having failed to foresee the last financial meltdown, are now desperate to brush up on their prophetic qualities and predict disaster this time round. Nor indeed the market traders and fund managers who make money out of the stampeding herd.

The interesting thing, though, is that neither the politicians nor the people of Europe seem to feel this way. "There's nobody at the moment whose interest is in seeing it fail," Peter Sutherland, Ireland's former EU commissioner, pointed out this week. Things could fall apart of their own accord, of course, but the fracturing of political associations – and the euro is one – tends to happen when a significant number of players actually see it to their advantage. They don't, for all the strains at the moment. Just the opposite.

But the more interesting point is that the public of the eurozone seem not to have turned against the currency and their membership of it. Enthusiasm for the broader "European project" may have cooled and respect for the Brussels commission virtually disappeared. And there is growing anger against the cuts. But so far the anger has been directed against their own governments, not the EU.

The politics of this recession are ambiguous. On the one hand, governments are introducing rafts of cuts which are arousing fierce resentment and opposition from affected groups and the voters at large. On the other hand, the public in even the most hard-pressed countries appear to have accepted that deep cuts are necessary and even right. Economists and oppositions may argue (and rightly) that the severity of the cuts now being introduced, not just in Britain but across most of the Continent, are unnecessary and, indeed, damaging to the hopes of recovery. But that is not what most citizens in polling record. They may not like the individual measures but they accept the broad necessity.

Much of this derives from a widespread feeling that western consumers had it too good in the years of plenty, that everyone (or the majority) had enjoyed a period of too much ease and too much credit, that it was wrong to saddle the debts of the parents on the children and that a reckoning was both inevitable and, in a curiously moral way, justified. In that sense, there is anger against the politicians for their actions but also a sense of shared responsibility. There is a mood (except among the bankers) that we are in this together and will have to find common solutions to get out of it.

How does this affect the politics of the euro? "It wasn't the euro loan," as an Irish friend said, "that really galled but any idea of a bilateral credit from the English". Even Greece, the most nationalistic of countries, has not sent mobs against the EC offices in Athens, although the involvement of the International Monetary Fund has aroused old enmities on the left.

Of course not, is one response, these are debtor nations in need of a bailout. They're not going to reject the euro now. But that does not really explain why the argument of economists – and the lurking thought of the creditor nations – that the indebted would be much better off reneging on their debts and restoring local currencies with which to depreciate their way out of trouble seems to scare voters more than the alternative of hanging on in there and swallowing the medicine, however bitter.

And they are right. If you do take the view that suffering now and over the next few years is the consequence of too much rich living over the past few years, then it is better done together than separately. That gives an awful lot of impetus to European leaders, even the Germans, to try to come up with a solution.

Just as the creation of the euro was largely a political act, so the difficulties of resolving its problems this time are largely political. In terms of economic competence, Europe at present is far from badly led. Wolfgang Schäuble, the German Finance minister, Christine Lagarde of France, Sweden's Anders Borg and Poland's Jacek Rostowski, the finance ministers of most countries indeed, have done a pretty creditable job. The problems have come with the political leadership, which has remained fractured, indecisive and inward looking.

There should be no surprise at that. The recession poses frightening problems for any democratically-elected government at the moment. And there are real and understandable problems over how to manage future economic co-ordination and discipline in the eurozone. Having embarked in more optimistic days on the ill-chosen course of the Lisbon Treaty, the EU is now saddled with a second-rate President, a third-rate foreign representative and a public which will simply not accept any more treaties or referendums. Any long-term solution is going to have to – and politically should – involve the banks, which lent so carelessly to countries living beyond their means, to share in the sacrifice of restoring their finances.

But if the politics prevent the kind of grand, all-embracing solution that the markets might like, they still encourage the search for a pragmatic course out of it. It is no more in the interests of international investors or the world at large that the euro-crisis forces a breakdown of the currency. So long as this is so, and the politics remain in its favour, then the odds are still on the euro's survival.

a.hamilton@independent.co.uk