Europe finds itself at a crossroads. The economic malaise will not only test institutions of the European Union, but more importantly the commitment of member states. Countries face a choice: hunker down in isolated provincialism, or act in a co-ordinated way. The latter would help Europe overcome recession and highlight the union’s legitimacy. The former, on the other hand, could threaten the very core of the European project.

As the financial crisis swept over the Atlantic and engulfed European banks, politicians – if somewhat belatedly – got their act together and co-ordinated their responses in bailing out banks. Now, however, the momentum is fading. A substantial fiscal stimulus is needed across the continent and particularly in Germany, the EU’s largest economy, to counter an economic crisis. Announcements made so far by the European Commission and individual states do not go far enough.