A series of crises shows the EU's diminishing global role

Opinions differ as to when the yawning gap between rhetoric and reality at the European Union became impossible to hide. Some spotted it at the climate change conference in Copenhagen in December, when the US president Barack Obama all-but ignored the Europeans in order to strive for a deal with China. Though the EU countries acted as a responsible bloc of 500 million people, the power in the conference chamber lay with Beijing. There was much talk of the world being run not by the eternally hatching but never flying European superpower but by a "G2" - a Group of Two made up of China and the US.

At the beginning of this month, EU leaders got another shock. Mr Obama decided he had enough of empty Euro-chatter. Even though the bloc has supposedly been reborn in a new institutional form, with a permanent president to streamline decision-making, Mr Obama cancelled a planned US-EU summit. There was little outrage across Europe, for a defeatist mood had already set in. Newspaper coverage of the summit preparations had focused on which of the four European leaders whose titles include the word "president" would get to shake Mr Obama's hand first and sit next to Michelle. Europe had lost its Obama moment.

Last weekend the EU suffered another diplomatic blow when Ukraine, the bloc's eastern neighbour whose fate is subject of a tug-of-war between Russia and the West, voted in as president Viktor Yanukovych, who is generally considered closer to the Kremlin than to the West. The election was fought on the record of the incompetence and squabbling of the outgoing government. Still, when Ukraine was swept by the "Orange Revolution" in 2004-5, the country turned to the EU for help. Nothing was done and Ukrainians were left in limbo. It seemed as if the bloc had decided it had expanded enough, and wanted to live in retirement from the world as a group of decayed ex-colonial powers.

Despite these signs of a lack of political will and institutional weakness, the EU still continued to trumpet the success of the euro, the currency used by 16 member states, calling it "a pole of macroeconomic stability". Financial speculators profit by testing such verbiage to destruction. When it became clear how recklessly Greece was living beyond its means, the hedge funds took an $8 billion (Dh29.4 billion) bet against the euro, thrusting the single currency into its deepest crisis in 11 years of existence.

The Armageddon scenario of Greece being forced out of the eurozone and resurrecting the drachma was always unthinkable: the country would be genuinely bankrupt, like Argentina a decade ago. The debt markets would target the next weak link in the southern European club of overextended borrowers - Spain, Portugal and Italy. The whole euro project would come to be seen as a Crusader Kingdom, a temporary affair not an immutable fact.

Yesterday the European Union president Herman Van Rompuy announced that the bloc would take "determined and co-ordinated action" to safeguard the stability of the euro area and would closely monitor the Greek government's promised deficit cutting measures. The burden is thus on the Greek government to face down its angry protestors and impose savage belt-tightening. Mr Van Rompuy made no mention of European loans to Athens, but if this plan is to succeed it must include the offer of European loans or guarantees from Germany and France.

There is no provision for bailouts of members of the eurozone, and for a very good reason: the Germans do not want to have to prop up every deadbeat government. Vast amounts of money have been spent on developing the southern European states, but this aid has not improved Greece's competitive position, but rather weakened it, all the while encouraging it to fiddle its statistics. There is no appetite in Germany to pour good money after bad.

This crisis has uncovered many weaknesses in the EU but foremost of these is the impossibility of having a successful currency union among sovereign countries with separate fiscal policies. Nouriel Roubini, the economist who is credited with being among the few to predict the scale of the 2008 financial meltdown, has stated: "No currency union has survived without a fiscal and political union." The French president Nicolas Sarkozy is promoting an "economic government" for the EU, but Germany will always consider this a step too far. Something in between - some stronger powers to ensure fiscal discipline - will have to be agreed, or the euro will always be suspected as a fair-weather currency union which can be bust apart in times of trouble.

The EU has always grown through crises. There are some in Brussels who see a chance to create a real political union, like the United States of America, rather than the patched-up agglomeration of states the EU is now. That seems unlikely. As the financial crisis has ravaged the weaker economies of Europe, the remedies have been specific to individual states, with the bloc as a whole conspicuously absent.

The dreams of global superpower status are now on hold. The mood is ever more inward-looking. If China turns out to be, as feared, the coming power, there will be an even more sober assessment of Europe's capabilities. For years the EU has thumbed its nose at the US, aspiring to be a counterweight to Washington. Somehow, the same act would lack credibility when the opponent is China. This would drive the EU and the US into each other's arms, as both Europeans and Americans realised who their real friends are, and the Europeans dropped their posturing. There are a lot of ifs in this scenario, but it looks like the future of the EU is a lot more modest than its past. @Email:[e-mail]