What will become of the European Union? One road leads to the full break-up of the euro, with all its economic and political repercussions. The other involves an unprecedented transfer of wealth across Europe’s borders and, in return, a corresponding surrender of sovereignty. Separate or superstate: those seem to be the alternatives now.

For two crisis-plagued years Europe’s leaders have run away from this choice. They say that they want to keep the euro intact””except, perhaps, for Greece. But northern European creditors, led by Germany, will not pay out enough to assure the euro’s survival, and southern European debtors increasingly resent foreigners telling them how to run their lives.

This has become a test of over 60 years of European integration….

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He is the unfrozen phenom.

Brian Baker was going to be a tennis star. That’s where this was headed. A decade ago, Baker was one of the best junior tennis players in the world, the wiry kid from Nashville, Tenn., with the punishing game, so good he would later reach the boys’ final of the French Open in 2003. His early résumé contained wins over characters you may know. Jo-Wilfried Tsonga. Tomas Berdych. Novak Djokovic. That’s right. The Djoker, the relentless No. 1 in the world, winner of four of the last five Grand Slams. That guy. Baker passed on college scholarships and pushed right into the pros. He had a clothing deal and a racket deal and a future. Life was good.

But then Baker’s body disobeyed him. Maybe “abandoned” is a better word. First Baker hurt his wrist, and missed 10 weeks. Then, in a qualifying match at Wimbledon versus Djokovic, Baker tore his MCL. This actually wasn’t so bad. Baker rehabbed his knee and resumed playing, but began feeling pain in his left hip. Hip surgery followed. Then, surgery for a sports hernia. All the while Baker’s elbow was nagging at him, especially on his serve. That led to Tommy John surgery on his elbow. Then more hip surgery””another procedure for the left hip, and the right hip as well. It was a spectacular run of medical intervention. Baker won a Grand Slam in the OR.

At this point Baker was 23….

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With Greece’s membership in the euro zone teetering, fears of bank insolvency rising and Europe’s leaders bickering about what to do, the euro crisis is once again intensifying and threatening to undermine fragile growth globally.

At a summit meeting in Brussels on Wednesday, regional leaders failed to signal any significant new steps to stimulate the sputtering regional economy or resolve the competing agendas of President François Hollande of France, who favors stronger action to spur growth, and his German counterpart, Chancellor Angela Merkel, who has opposed aggressive moves to ease the pressure on Europe’s weakest economies.

Yet, the urgency for a solution to the region’s debt crisis, now in its third year, may never have been greater.

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…I do think that it would ultimately be better if the eurozone broke up. This might not involve a complete reversion to national currencies. A hard core of euro-users, centred on Germany, might survive. But the current euro will have to go.
It is true that the transition from here to there will be painful and dangerous. My colleague Martin Wolf laid out an updated version of the full horror scenario in Friday’s FT ”“ involving a breakdown of law and order in Greece, and financial collapse across Europe. How could anyone responsibly run that risk?

The answer is that the alternatives to eurozone break-up are inherently implausible and deeply unattractive.At the weekend G8 leaders called for Greece to stay in the eurozone. Their present plan seems to involve some magical mix of stimulus and austerity that restores both budgetary balance and growth. But even if they can agree a real plan and even if it works ”“ and neither outcome is likely ”“ the eurozone’s structural problems would remain…..

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The immediate future of the global economy, including Australia, now depends on Europe, and whether it can restore confidence to markets. If European leaders can resolve their tangle of problems, growth is ahead of us. If they can’t, all bets are off.

Pessimism comes more naturally than optimism. It is now five years since we first heard the phrase ”the sub-prime crisis”, which rang the end of a golden era of debt-financed growth. Since then, we’ve had years of recurring crises, summits and resolutions that promised to solve the problems, but haven’t.

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Like the single market before, …[the Euro] was conceived primarily as glue to bind Europe more closely together, tie Germany’s prosperity to that of its neighbors and prevent a third world war from the Continent, which had brought us two. A few engineering flaws wouldn’t be allowed to get in the way of such an important project.

A little over a decade since the first euro bills hit the shops in Madrid and Berlin, the euro’s design flaws have pushed much of the European Union into a deep economic pit. And political imperative is again being deployed as a major reason to stick to the common currency. “This enormously important motivation is often underestimated by outsiders,” argued the Financial Times columnist Martin Wolf, the most sober analyst of Europe’s economic maelstrom….
The main problem is that while leaders eagerly embraced the monetary bond, they rejected its necessary complement: a central budget that would transfer money from successful regions to underperforming ones, as the United States government sends tax dollars collected in Massachusetts to pay for unemployment benefits in Nevada.

The euro fed the illusion that Greece, Spain and Italy were as creditworthy as Germany or the Netherlands, propelling a decade-long credit boom in Europe’s less-developed periphery. And it was spectacularly ill-designed to deal with the shock when capital flows to those nations suddenly stopped. Weak countries not only had to rely on their own devices; they had to do so without a currency or a monetary policy of their own to absorb the blow….

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French President Francois Hollande and German Chancellor Angela Merkel, who held their first meeting yesterday, might want to consider that they have been attacking the problems of Greece, the euro, Spain, Portugal, Italy, and even France backwards.

All the talk and all the effort has been aimed at keeping Greece and the others in the euro. But the real, ideal solution is to get Germany out.

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There would be massive global pressure on Europe to handle the exit in a grown-up fashion, with backstops in place to stabilize Greece. The IMF would step in.

The German finance ministry is already drawing up such plans, and quite correctly so (unfortunately roping in the British too to spread the losses, which is a thorny subject).

Needless to say, the real danger is contagion to Portugal, Ireland, Spain, Italy, Belgium, France, and the deadly linkages between €15 trillion in public and private debt in these countries and the €27 trillion European banking nexus.

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The euro crisis is entering its final stages. Economic pain is now interacting with political resistance to produce intense financial pressure. I expect Greece to leave the euro ”“ and perhaps very soon.

It could happen voluntarily, but both the Greek people and Greek politicians are still clinging to the idea that they can put an end to austerity yet still stay in the euro. In order to try to achieve that, a new government may call the eurozone’s bluff.

At that point, the other eurozone members would face an awkward choice. Doubtless there would be voices in favour of providing the money, willy nilly. That might well be the French position. But if the eurozone gives way on this, what chance would there be of painful austerity being continued, not just in Greece but also in Portugal, Spain, Italy and Ireland? The northern countries would face the prospect of pouring money into a bottomless pit.

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“We don’t wish to express any opinion on the result, but there is a satisfaction when our values are evoked by the future president of the country,” said Muriel Menanteau, a spokesperson for the Protestant Federation of France, which represents more than 800,000 of the 1.2 million Protestants in the country.

The federation had held a meeting with Hollande during the campaign because of his support of secularism and had given him a document calling for a return to facts and accuracy by “leaders in the political, economic and social spheres.” It also implicitly criticized the targeting of immigrants and Muslims that had taken place in the run-up to the two rounds of the elections.

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My own view is… [that] the German deflation regime is – in the current circumstances – the greater threat to Greco-Latin societies, and to post-War comity in Europe. Sometimes you have to go through a cathartic trauma to break free.

But it is also true that Germany’s own democracy may turn fractious if policy strays too far from German needs and Grundgesetz. This is EMU’s curse. It destabilizes each nation state in turn, each in different ways – a “negative sum game”.

The worst of all worlds would be a nasty spat between Mr Hollande and Chancellor Angela Merkel that poisoned the atmosphere without bringing about any substantive change to Europe”˜s “asphyxiation compact”.

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French President-elect Francois Hollande is to start work on forming a new government, after declaring to his supporters that his victory gave hope there would be an end to austerity.

Mr Hollande has vowed to rework a deal on government debt in eurozone member countries to focus on promoting growth.

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Much depends on the reaction of investors in debt issued by European nations, said Dimitri Papadimitriou, president of the Levy Economics Institute at Bard College. If they fear that the crisis response is losing momentum, they will likely demand higher interest rates ”” not just from Greece, but from other nations seen as carrying too much debt.

The result would be rising borrowing costs for Greece as well as countries that haven’t received bailouts, like Italy and Spain. Rising borrowing costs sent global stock markets diving last year. Uncertainty about the path forward in Europe may mean a return to extreme market volatility after several months of relative calm.

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Francois Hollande, the former leader of France’s Socialist Party, has been elected president of France, defeating incumbent Nicolas Sarkozy.

Despite being one of France’s best known politicians, the 57-year-old Hollande has never held a position in the national government.

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The final polls before France’s presidential election on Sunday show President Nicolas Sarkozy making up ground on Socialist challenger Francois Hollande – but still predict a Hollande victory.

Mr Sarkozy on Friday predicted a “surprise” and Mr Hollande urged his voters to avoid complacency as the bitter campaign neared its climax, driven by fears about joblessness, immigration and France’s economic future.

A poll by the BVA agency shows 52.5 percent support for Hollande and 47.5 percent for Sarkozy. A poll by the agency CSA shows 53 percent for Hollande and 47 percent for Sarkozy.

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At least twenty million French ”“ around half of the French electorate ”“ tuned in to watch Mr Sarkozy fight for his political life and see whether he would make good his pledge to “atomise” his left-wing rival during the almost three-hour clash.

Trailing Mr Hollande in the polls by at least seven points ahead of Sunday’s presidential runoff, this was the Right-winger’s best hope of catching up to defy the odds.

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The French-led counter-attack and rumblings of revolt through every branch of the EU institutions last week have brought this aberrant phase of the eurozone crisis to an abrupt end.

“It’s not for Germany to decide for the rest of Europe,” said François Hollande, soon to be French leader, unless he trips horribly next week. Strong words even for the hustings.

“If I am elected president, there will be a change in Europe’s construction. We’re not just any country: we can change the situation,” he said.

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A rupture between France and Germany would come at a dangerous time. Until recently, voters in the euro zone seemed to have accepted the idea of austerity and reform. Technocratic prime ministers in Greece and Italy have been popular; voters in Spain, Portugal and Ireland have elected reforming governments. But nearly one in three French voters cast their first-round ballots for Ms Le Pen and Mr Mélenchon, running on anti-euro and anti-globalisation platforms. And now Geert Wilders, a far-right populist, has brought down the Dutch government over budget cuts. Although in principle the Dutch still favour austerity, in practice they have not yet been able to agree on how to do it…. And these revolts are now being echoed in Spain and Italy.

It is conceivable that President Hollande might tip the balance in favour of a little less austerity now. Equally, he may scare the Germans in the opposite direction. Either way one thing seems certain: a French president so hostile to change would undermine Europe’s willingness to pursue the painful reforms it must eventually embrace for the euro to survive. That makes him a rather dangerous man.

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With Socialist leader Francois Hollande likely to become the next president of France, Europe’s hot populist anger is about to confront the cold austerity measures required by the euro zone, with a predictable result: a storm that rattles the foundations of the European economic house.

Financial traders and treasury ministers are debating this week just how much damage this political-economic collision will bring. Some argue that it could take down the structure entirely. Others insist that Germany, for all its insistence on austerity, will never let the structure collapse ”” and will make the necessary concessions to keep the common currency intact.

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If Spain’s crisis deepens Europe’s recession, it could tip the entire world economy into a stubborn slump. The ramifications would be enormous, including: reduced odds of Barack Obama’s reelection, assuming a weaker U.S. recovery; less political cohesion and more social unrest in Europe (even now, the European Union’s unemployment rate is 10.2 percent); and growing pressures in many countries for economic nationalism and protectionism.

Spain is suffering a hangover from what economist Desmond Lachman of the American Enterprise Institute calls “the mother of all housing booms.”

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President Sarkozy, whose personal unpopularity dominated the campaign, is the first head of state to come second in a first-round poll since France switched to presidential politics 50 years ago. Even a barn-storming performance by Mr Sarkozy in TV debates with Mr Hollande in the next two weeks seems unlikely to save his presidency in the two-candidate, second round on 6 May.

In a speech to ecstatic supporters in his fiefdom in Tulle, south-west France, Mr Hollande said: “I am now in a position of strength to be the next President of the Republic…This vote is a disavowal of the policies, and the personal behaviour, of the outgoing candidate, whose campaign in recent weeks has finally served the interests of the National Front.”

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In interviews at Paris polling stations, French citizens expressed little real joy in the vote but felt that France’s future is so uncertain that they needed to do their civic duty.

“Whoever is elected, things are going to be hard,” says a middle-aged Frenchman, Angelo Benkaddour, outside a voting station in Paris’ 10th district. “What’s happening in Greece and Spain [economic woes], it is coming here.”

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…the team around him has quietly started to have doubts about victory, and is debating the best strategy to try to overcome serious odds.

Mr. Sarkozy is in deep trouble and is looking, for now, as if he could be the first one-term French president since 1981. He appears to be running neck and neck with his main challenger, the Socialist candidate François Hollande, in the first round of voting on Sunday, when 10 candidates are competing. But all the opinion polls show Mr. Sarkozy losing to Mr. Hollande in a face-off two weeks later.

His possible defeat carries implications that would radiate far beyond Paris. Mr. Sarkozy has had contentious but valuable relationships with Chancellor Angela Merkel of Germany, a fellow conservative, on European and euro zone issues; with the British on defense issues, including the Libyan war; and with President Obama on issues involving Iran and Israel, NATO and Russia.

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(The full title is: “White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You”)–KSH

What was the main difference between Great Britain and France? It -wasn’t the size of their national debts: at the time of the French Revolution, Great Britain’s debt per person was much larger than France’s. The difference was politics. In Great Britain, the political system was dominated by elected representatives who supported an activist government and were willing to endorse the taxes necessary to pay for its resulting debts. In France, the government did not have the legitimacy necessary to raise the money to service its smaller debts. And although its tax rates were lower than Britain’s, the problem of taxation without representation was an important cause of the Revolution.

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In his alleged attacks, Mr. Merah appeared to follow al Qaeda’s founding cause of killing “Jews and crusaders.” He is suspected of having shot dead three soldiers from regiments that had dispatched troops to Afghanistan, and of having opened fire on a Jewish school in Toulouse, leaving four dead, including three children.

On Wednesday, police say he told his interlocutor that he had “brought France down on its knees,” expressing regret that he had failed to kill more people.

“He appears to have drifted into a parallel world where he picked and chose elements to build himself a new identity,” said Jean-Pierre Filiu, a professor in the Middle East department at the Paris Institute of Political Studies.

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The French Interior minister says Mohammed Merah, the prime suspect in seven murders in and around Toulouse, died Thursday morning in a jump from an apartment window after “shooting madly” at police who raided the building.

French Interior Minister Claude Gueant said police entered the apartment Thursday after hearing nothing from Merah overnight, only to be ambushed by the suspect who “came out of the bathroom shooting madly at everybody.”

“At the end, Mohammed Merah jumped out of the window with a weapon in hand, continuing to shoot. He was found dead on the ground below,” said Gueant.

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French police are linking the shootings of four people at a Jewish school in Toulouse to the killings of three soldiers of North African descent in two separate incidents last week.

The same gun and the same stolen scooter were used in all three attacks, sources close to the investigation say.

A teacher and three children were shot dead at the Ozar Hatorah school, and a teenage boy was seriously injured.

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Muslims are being used as “scapegoats” in the French election campaign in which halal slaughter has become a hot-button issue, the French Council of the Muslim Faith said yesterday.

The statement came a day after the prime minister, Francois Fillon, urged Muslims and Jews to consider scrapping their “outdated” halal and kosher slaughter rules.

The council, asked about Mr Fillon’s comment on halal, said it “does not accept that Islam and Muslims be used as scapegoats in this [election] campaign”.

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Iran’s government ordered a halt to oil exports to Britain and France on Sunday, in what may be only an initial response to the European Union decision to cut off Iranian oil imports and freeze central bank assets beginning in July.

Britain and France depend little on Iranian oil, however, so their targeting may be a mostly symbolic act, a function of the strong positions Paris and London have taken in trying to halt Iranian nuclear enrichment and bring pressure to bear on Syria, one of Tehran’s closest allies.

Tehran may also be reluctant, when its economy has been damaged by existing sanctions, to deprive itself of revenues from its larger European customers. At the same time, it may be seeking to divide the 27-nation European Union between those who depend on Iranian oil and those who do not

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