BEIJING - "Europe" is no dream, no political mission; it is not something that will drive people to cast their heart over all risks. Nevertheless it must be pursued for very practical reasons in the interests of everybody, including Germany. This is the European Union according to German Chancellor Angela Merkel, who clearly framed the central issue of the present euro crisis in a recent interview with German TV network ZDF: Germany would be willing to help weaker states that are facing difficulties, but in return would expect more European control over those member states.

This is a very positive message all around for Europe. It is a clear signal that Brussels will gain greater political union with those "negligent" states. And it is a clear message to the markets and those people speculating against the euro that Germany, the largest economy in the euro area, will indeed intervene to defend the common currency.

"There will be no solidarity [in Europe] without controls," said the chancellor. She also offered a reminder that, "if you have a common currency, that means, of course, there are advantages in addition to obligations, and the policy decisions of each member affect other countries. We have to be more engaged" in rigorously monitoring the situation, the chancellor continued, adding that it "must give EU institutions more power to act against countries that do not respect the rules. A control that is binding and would not allow easily violations of the rules that we have imposed."

Merkel then reiterated her call for increased powers on the European Union level. Europe must become more bound together, she said, and the fiscal pact was a step in this direction. She added that European institutions should have greater powers to sanction member states that do not adhere to the rules.

However, the responsibility for salvaging the common currency now has turned from Berlin to the capitals in financial jeopardy. They have to decide whether to accept greater control over their financial systems from Brussels or to simply leave the euro. It is a political choice about sovereignty in those states because their governments, for whatever reason, have been unable so far to put in place the necessary measures to rescue themselves on their own.

The financial crisis then clearly becomes a political challenge. Are the profligate PIIGS (Portugal, Ireland, Italy, Greece, and Spain) willing to give up part of their sovereignty to the European Union? In this case, whatever their answer is, it will be positive for the European Union in theory. If those states decide to retain their sovereignty, then they simply and voluntarily move out of the euro zone. This is a voluntary secession that should not expose the union. If, conversely, those states decide to stay in the union by giving up part of their power to Brussels, they will reinforce the EU and contribute greatly to creating a stronger political union in the old continent.

The real issue is not so much for the smaller countries, whose decision to move out of the united currency could be somehow digested by the union, but for the larger economies: Spain and, of course, Italy. If either of these two countries were to leave the union, this could trigger a chain reaction, creating a crisis of continental and global proportions.

However, if either of these states were to be salvaged without controls put in place, this would not only anger German taxpayers, it could have the potential to suck dry Germany and all the virtuous northern countries, who could end up paying through their noses to countries that are wasting those resources.

Therefore, political control over those profligate countries is an absolute necessity to save those countries from themselves - and of course, to save the virtuous countries, headed by Germany, that are willing to lend a hand.

This necessity creates very different scenarios in many European countries. Brussels will have to put in place tools enabling it to gain effective control over the economies of these countries. That is, Brussels will have to gain access to meddle in the financial, education, and healthcare systems of the Italian and/or Spanish state - and possibly reorganize those sectors. It is a huge task for Brussels and for the profligate countries.

In this case, Italy and Spain can either wait for Brussels to reshape their own state structure, or they can move ahead themselves to limit external intervention. Recent moves by Madrid to fix the banking system and by Rome to deal with state debt and the sale of state assets are going in this direction. Italy is again the centerpiece of this reorganization.

Last week, Italian Prime Minister Mario Monti gained some confidence from a selected group of American businessmen and politicians for his program of restructuring the economy. After that, he launched a program of privatization of state assets, which could fetch in the market some 600 billion euros (US$737 billion) of new cash, something that could reduce state debt by 30%. These programs have to be carried out over a longish period and will change the political and social structure of Italy and of all interested countries.

Millions of people will have to change their life, their very thinking. For this reason they have to be strongly motivated, and a cold, dry calculating message will not suffice. This perhaps is what is missing more than anything else from Chancellor Merkel.

Millions of Europeans can't be expected to change their life, to lose the national independence that drove their lives for over a century just for some petty accounting reasons. It is hard to calculate accounts; long- and short-term interests may conflict; moreover, people need more than money to survive.

In China, Deng Xiaoping drove reforms that changed his country's and the global economy. Putting on a cowboy hat, he gave people in and out of China a dream, that they could become as wealthy as the Americans.

European states, in or out of the euro, is at a political crossroads, and for this Merkel needs to give a dream to the people. This is what we are all, including the markets, are waiting for.  (2012-07-19 Asia Times)