Research

Inaction to fix the banking sector also troubles markets, said Simon Tilford, an economist with the Centre for European Reform in London, because it "highlights a willful refusal to recognise the core of the crisis, which is the collapse of economic activity and low economic growth." Without growth, he said, there is no easy way forward; growth cannot be produced by austerity or by structural reforms, even if those may help later.

"The court ruling removes a substantive obstacle, but there’s no doubt that the situation still looks pretty grave," said Simon Tilford, chief economist at the Centre for European Reform in London. The underlying problems of heavily indebted states and weak, undercapitalised banks still have to be addressed to find a long-term solution, Mr. Tilford said.

Some defence experts, like Tomas Valasek of the London-based Centre for European Reform, suggest that Washington's diplomacy worked, in that during the Libyan conflict "the allies established a new division of labour for NATO operations on Europe's borders, which should be encouraged."

Katinka Barysch of the Centre for European Reform in London said the Finnish attitude was harmful for Europe. "That is an attitude that if it materialised in Germany would be very dangerous," Barysch said. "The only good solution I can imagine is to get rid of this. If the Greeks were able to give collateral for all the bonds they issue or for the money we lend them, they wouldn't need us anyway."

"In countries like Finland, the opposition to what are described as bailouts is huge," said Philip Whyte, senior research fellow at the Centre for European Reform in London. "Governments are politically constrained."

Tomas Valasek of the Centre for European Reform, a think tank in London, says opportunities exist for smarter defence spending. Most spending is not for military operations, he says, but for things like training, education and procurement. Four-fifths of European equipment budgets are spent on products from domestic manufacturers, which often don't offer the best value. "There's a shocking contrast between the way we fight together and the way we build our forces in splendid isolation from each other," he says.

Germans feel poorer and more troubled in their own economy it will make them less generous in providing aid, in making full use of the EFSF, in considering things like euro bonds. They will have more worries, be more insecure," said Charles Grant, director of the Centre for European Reform in London.

Philip White, of the London-based Centre for European Reform, explains that EU leaders are torn between meeting the demands of the markets and upholding democratic norms: "The stage we are at in the eurozone crisis presents politicians with a deeply uncomfortable position: trying to convince markets that they are taking the necessary action to place economies on a more sustainable path and that the euro is here to stay while on the other hand to persuade their electorates that they are respecting democratic traditions." "If you look at the debt and deficit numbe