(Reuters) - The European Union's Nobel peace prize comes just as a realization is dawning that Europe's single currency - the EU's most ambitious project - has survived three years of incessant financial turmoil and is not going to break up.
But having narrowly avoided an acrimonious divorce and the loss of some of its errant children, the euro zone risks a future as an unequal, loveless marriage with frequent rows and the prospect of separate bedrooms.
Two things have become clearer in the last few weeks that were widely disputed before: contrary to prevailing opinion earlier this year, the euro is here to stay and could very probably keep all 17 members and add more in future.
But the euro zone has not yet found a way out of the doldrums of economic stagnation, unemployment and social dislocation that are widening the gap between northern and southern Europe and fuelling Eurosceptical populist movements in many countries.
Three events have changed the outlook for the euro area:
- The European Central Bank put a floor under the euro zone by agreeing last month to buy unlimited quantities of bonds of any troubled member state that accepts the conditions of a bailout program. ECB President Mario Draghi made clear the bank will use all its tools to defeat anyone betting on a break-up of the monetary union.
- The euro zone's permanent rescue fund came into effect last week after months of wrangling and legal challenges, providing a 500 billion euro backstop for countries that risk losing access to capital markets.
- And German Chancellor Angela Merkel signaled by visiting Athens that the EU's most powerful economy wants Greece to stay in the euro area, drawing a line under months of debate in Berlin, notably in her own coalition, about ejecting the Greeks.
Coincidentally, a flood of scenarios for the explosion and break-up of the euro that spewed out of the banks and political risk consultancies of London and New York for months has suddenly dried up.
In currency markets, short bets against the euro have subsided. Bond yields have fallen and bank shares have recovered. Spanish banks are having to borrow less from the ECB as some regain access to the money markets.
David Fuller's view Using our behavioural approach, Fullermoney has long maintained that because the euro was a political construct, Europeans would be able keep the single currency going if that is what the politicians and bureaucrats clearly wanted. And since government officials can sometimes say yes when they really mean no, and vice versa, we needed to watch what they were doing in addition to what they were saying.
I have also maintained that the euro was unlikely to be a club which countries could join - despite some massaging of their accounts which made liar loans of mortgage fame look like minor pranks - but never leave. However, we have yet to see any country vote to escape from its euro cage, although it may happen one day and others would presumably follow. For historical reasons it is less likely, in my view, that any country could be expelled from the euro.
Meanwhile, ECB President 'Super' Mario Draghi has herded his squabbling Eurozone cats very effectively, with some help from the IMF, towards the necessary banking union as part of a closer fiscal integration. He has also battered some of those vocal investment banks and hedge funds which were shorting peripheral European country debt. Consequently, Spanish and Italian borrowing costs are now more manageable.
It may take Eurozone countries longer to find their way back onto a growth track, although they do not have to reinvent the wheel to do so.