BUSINESS OPINI0N:The single currency dream can still be a reality but first we need to escape nightmare of the brinkmanship that passes for political discourse

AS THE final countdown to that most magical time of the year begins, let us wander in the domain of the fantastic and the magical.

Imagine, in this place, a group of individuals driven by a dream of a common economic area – a place one can use the same currency to trade across a broad market, the second largest global trading bloc.

These men are not dreamers. They are some of the hardest bitten policymakers of the postwar generation. If not they, then certainly their parents, have witnessed the privations of war; they do not want for incentive to ensure their creation promotes stability.

But they are in the grip of their vision and, to realise their dream, they opt for the path of political expediency and compromise over proper fiscal oversight.

The founders of our currency were good men, visionary people, but in their pursuit of the euro zone, they blinded themselves to the sensible stress-testing of the proposed new currency to allow for the inevitable strains of a downturn. And also for the perhaps less inevitable collapse of a bloated global banking system, encouraged in its inherent pursuit of profit by an era of “light-touch” regulation but perched precariously on a fragile structure of underlying funding.

They chose also to ignore the reality of member economies at very different points of an economic cycle.

More critically, perhaps, the vision is to be expansive – to include as many states within the new Europe as possible. Britain, the third largest economy on the continent, may not wish to partake; never mind, plenty of others will – even Greece, a country known as much for its fundamentally fractured system of tax collection and notoriously unreliable national accounting as for the Acropolis.

They were not totally blinded by their vision, these founders of what is now the second largest currency worldwide behind the dollar. At German insistence, they established an independent European Central Bank. They also put in place a Stability and Growth Pact, a set of rules limiting annual budget deficits and overall levels of national debt, designed to promote fiscal discipline.

Fatally, in this realm of the fantastic, the currency’s founders entrusted the policing of this pact to the future euro zone’s political leaders. And when the zone’s two largest economies – Germany and France – escaped censure for breaches, there was little chance other, smaller economies would feel bound by its strictures. For that, the more than 330 million people living in the euro zone – and countless millions outside it – are now paying a heavy price.

There is time still to recover the vision, to put it on the necessary pragmatic fiscal footing it requires. But first we need to escape the nightmare of the brinkmanship which passes for political discourse.

The impasse is a reflection of the broad cultural mix in the EU. Germany, with its troubled history, seems neither to trust itself to lead nor to allow others to wean it from its fixation with inflation. France, desperate to retain its standing as a “power”, if only in Europe, sees no problem that cannot be addressed by diplomatic compromise – in the past a source of its strength, but now held responsible for some of the more ill-fated decisions in Europe.

The Mediterranean belt appears as ill-disposed as ever to discipline – witness Silvio Berlusconi’s transparently contemptuous manoeuvring.

And yes, the feckless Irish, forever the poor relation, incapable of careful husbandry in our brief time of plenty, even if we have belatedly accepted the necessity of balance.

Yes, Germany, as the country that will effectively bankroll the bulk of any recovery, is right to ensure that acceding to the ECB becoming a lender of last resort in the euro zone will not be seen as making the bank an easy touch for irresponsible and populist national governments.

But Germany, too, must open up to the idea that such a recovery will come from a balance of necessary austerity and carefully targeted growth.

With its partners in the euro zone, it must reach a point where it can convince markets that the zone speaks as one, and that the full financial weight of the ECB will back that up. In return, it must insist on a measure of fiscal discipline across the zone, one that is backstopped by a necessary measure of centralised control.

That does not mean the inevitable harmonisation of Ireland’s corporation tax rate nor excising the distinguishing features of the bloc’s other economies. If competition within the zone is expunged, the peripherals become little more than outlier fiefdoms of the centre.

The current fashion for convening crisis summits to “solve” or “end” the crisis only to produce a restatement of positions already discredited by the markets amid a welter of leaks and counter-briefings is irresponsible in the extreme. If the people of Europe deserve anything of their leaders in 2012, it is true leadership and the introduction of a durable framework for the euro of the future.