Will European Union survive?

May 31, 2010 at 12:00a.m.

Associated Press

LONDON

Forged out of the ashes of World War II and the end of the Cold War, the European Union was meant to create peace and prosperity across the region. But Europe’s debt crisis has laid bare deep financial and cultural divisions within the 27-nation bloc that may never be bridged.

The fateful decision to make the EU effectively a halfway house — tying its member countries into a joint currency and interest-rate decisions, while allowing them to retain control over national budgets and taxes — has left the fractured grouping at a crossroads.

Further political and economic integration leading to a common treasury — a central government, in effect — could rescue the ailing 11-year old euro currency, and some say now is the time to sieze the moment.

But what the head orders is not always what the heart desires: Greeks, Germans and even eurozone outsiders such as the British are fiercely protective of their independence, their languages and ways, including the right to decide how they spend their own tax dollars.

As the possibility of EU disintegration — or a split among its members — looms larger, the current crisis just may have exposed the futility of ever trying to establish a United States of Europe. The recent agreement by member governments to put up $1 trillion in loans and guarantee to backstop troubled governments remains only a short-term fix to stave off bond- market panic.

A fiscal union, where budgets and taxes are decided centrally, would prevent member nations from running up big deficits and allowing money to be diverted across the bloc as needed.

A major stumbling block is the fact that Europe is a geographical, not a cultural, term.