Why Europe Isn't Celebrating

This could have been a year of joy for Europe. The 20th anniversary of the fall of the Berlin Wall will be commemorated in November, and it has been five years since the European Union's "Big Bang" enlargement. The Cold War division of the continent is well and truly over.

But, instead of setting off fireworks, the EU finds itself under fire as the global economic crisis confronts it with the greatest challenge it has seen since 1989. After years of strong growth and remarkable resilience, the EU's new member states in Eastern Europe are being hit hard by the economic turmoil that started in the West. Integration into the global economy - a crucial source of capital, stability and innovation - has become a threat to many of these countries. This is true both of the region's financial sectors and its real economies.

But the tough question that has to be asked is whether the crisis could lead to the unraveling of European integration. There are four key issues that need to be tackled to ensure that Europe emerges from this crisis strengthened.

The first issue concerns the continuation of enlargement. The EU is an indisputable success, constituting the largest integrated economic area in the world and accounting for more than 30 percent of world gross domestic product and about 17 percent of world trade.

But EU membership has always been about more than economic integration and trade flows. Today, membership is a more powerful incentive than ever for what the EU calls three "candidate countries" - Croatia, Macedonia and Turkey - and five "potential candidate countries" - Albania, Bosnia and Herzegovina, Kosovo under UN Security Council Resolution 1244, Montenegro and Serbia.

The second key issue concerns the EU's internal structure. The Lisbon Treaty offers a fundamental redesign of how the union works, but despite the pressing need to enhance EU institutions' mobility and flexibility it is still awaiting ratification. The economic crisis makes it more important than ever to introduce these reforms.

Third, there is the euro. The 12 new member states that joined the EU in 2004 and 2007 committed themselves to its adoption, but with no set date. Expansion of the euro zone has therefore been slow, especially in Central and Eastern Europe, where to date only Slovenia and Slovakia have become members of the single currency.

But the financial and economic crisis has demonstrated the benefits of euro membership. Ten years after the common currency's introduction, the 16-member euro zone has the world's second-most important currency, accounting for more than a quarter of all central banks' foreign-exchange reserves and having overtaken the dollar as the currency of choice for global bond issues.

The final issue concerns European solidarity. EU enlargement brought greater prosperity, with living standards improving throughout the union, particularly in the new member states. But many of the older members also benefited and not only in economically measurable ways. The growing together of people, regions and countries underpins the foundations on which Europe rests.

The EU's newcomers have adopted growth models that rely to varying degrees on foreign capital to finance domestic investment and on banking systems that are largely owned by West European banks. It is a model that has served new and old member states well.

This process enabled West European companies and banks to expand into new markets with higher growth rates and thereby satisfying pent-up demand and tapping unrealized potential. This has created jobs in Central and Eastern Europe, while boosting prosperity in the older member states. To turn our backs on these countries would have serious economic ramifications.

The EU drew the right conclusions when it stressed that national bank rescue packages must not be designed in ways that starve subsidiaries, and also by doubling - to 50 billion euros ($71.8 billion) - the crisis funds available to EU countries outside the euro zone. The EU must not stand aside when solidarity is needed.

Today's crisis offers an opportunity to show that the EU can provide stability, support and solidarity. By taking the right steps now, the EU is laying the foundations that will enable it to emerge from today's difficulties strengthened and more united.