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Split the EU? Europe debt crisis pushes idea into the open.

Splitting the EU – creating a small core of eurozone countries and a looser outer circle – has been taboo. But as Europe debt crisis worsens, France and Germany are discussing the idea more intensively.

By Staff Writer / November 11, 2011

Presidential guards perform a change of shift in front of the parliament in Athens, Friday. Greeks lauded the nomination of new prime minister Lucas Papademos on Friday and expressed hope his government could put the economy back on track but France and Germany are already discussing splitting the European Union into two zones.

John Kolesidis/Reuters

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Paris

A long-running taboo on the idea of splitting the European Union into two zones or tiers is being breached by a debt crisis that has brought Ireland, Portugal, Greece, and now Italy to their financial and political knees.

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An EU comprised of "core" dynamic nations and less-competitive "peripheral" nations has been viewed for years as abridging the idealistic project of a postwar Europe of greater integration and unity. Critics say the idea is harmful at a time when EU confidence is low, and will reopen national divides and have bitter unintended consequences. But advocates say the 27-nation EU doesn't coordinate well – and that the EU is already, in fact, operating at two speeds.

French president Nicolas Sarkozy was the first EU leader to openly break the stricture on discussing a new division, talking this week about a Europe of “core” nations and less dynamic states in a speech at Strasbourg University in France. "In the end, clearly, there will be two European gears," he said: "one gear toward more integration in the eurozone and a gear that is more confederal in the European Union."

The current European debt crisis dramatizes the issues. The debt crisis that emerged in Greece in 2010 reached another stage Thursday as Greece chose – after four days of political wrangling – a new caretaker prime minister, Lucas Papademos.

A former deputy chief of the European Central Bank and Harvard professor, Mr. Papademos appears to have won the day in Athens simply because he is not in the grip of local politics. He has only 100 days to act before new elections, and faces an immediate test to approve a 130-billion-euro EU bailout package and pass muster for an 8-billion-euro loan installment to avoid bankruptcy in December. 

At the same time, in Italy, the eurozone's third-largest economy, a front-runner emerged, Mario Monti, to take over from Prime Minister Silvio Berlusconi, who agreed to leave this week amid an epic rise in the nation's borrowing rate and a 1.9 trillion euro (about $2.6 trillion) debt.

Mr. Monti is a former EU commissioner and would lead a so-called “technocratic government” designed to calm markets.

Merkel adopting a two-Europe policy?

A two-tier Europe has been discussed in hushed tones for more than a year in EU financial and political circles. But Reuters on Thursday quoted an unnamed senior EU official in Brussels saying that "France and Germany have had intense consultations on this issue over the last months, at all levels.”

European Commission President José Manuel Barroso warned this week against entertaining the idea, saying in a Berlin speech that "there cannot be peace and prosperity in the north or in the west of Europe if there is no peace and prosperity in the south or in the east.”

In recent weeks, German chancellor Angela Merkel has appeared to adopt a two-track policy. She strongly supported the concept of a single Europe in rousing statements on Oct. 26 at the Bundestag, and has said that the end of the euro would mean the end of Europe. But she was also ready to see the back of Greece in the eurozone at the G-20 summit Nov. 4.

Critics argue that Mrs. Merkel has been putting the squeeze on Greece and other struggling eurozone states with severe austerity demands that could force them out.

Indeed, in Greece, the crisis is amplified by a popular feeling that future Greek generations will be yoked indefinitely to austerity. Meanwhile, the Germans, often called the paymasters of Europe, are saying they do not want to be yoked indefinitely to a future of expensive bailouts of less competitive nations.

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