The markets have steadied a bit after their loss of nerve on Monday. But you can't help feeling that it is a bit like a climber, sliding down a glacier to his inevitable doom, who breaks his fall for a while on a crumbling ledge that soon will give way.
Things in Euroland have taken a bad turn for the worse - and it's the politics, stupid. It is not just the uncertainty about the second round of French presidential elections on 6 May. François Hollande, the Socialist leader, will probably win, because it will be easier for him than for Nicolas Sarkozy to pick up votes from those whose candidates were knocked out in the first round. But the energetic Sarko should never be underestimated. He is pitching his campaign hard to gain votes from the hard Right supporters of Marine Le Pen. Herein lies the problem for the euro and for Germany.
It almost doesn't matter who wins the election. The fiscal compact agreed in principle by 25 out of 27 European leaders in January - "a kind of German straitjacket for the fiscally wayward", to quote Stephen King, group chief economist of HSBC - is Angela Merkel's pride and joy, her answer to all the eurozone's difficulties. Typically, like the euro itself, it has been designed to make everyone more like Germany. Hollande has already made it a plank of his campaign to renegotiate the compact. Meanwhile, as Sarkozy moves ever rightwards, striking a strongly nationalist tone (and risking the estrangement of centrist voters), he puts himself increasingly at odds with a compact designed to create greater fiscal union on German terms. If Sarko wins, it is hard to see how Merkozy, never the warmest of unions, can simply pick up where they left off.
This is very bad news for Berlin; and could mean uncertain French intentions continuing long after the elections. Might the fiscal compact be derailed altogether? Given the collapse of the Dutch coalition government as well, this is a real possibility. The Netherlands is no flaky Mediterranean economy, but, with Germany, one of the most solid citizens of the eurozone.
Yet, it has been hit by a strain of euro-contagion. This has nothing to do with debt mountains, deficits or default. The contagion is political and it is this. People are simply not prepared to wear the German hair shirt any longer. The demands of austerity have gone beyond what societies and parliamentary democracies will tolerate. There is a direct link between riots in Madrid, a collapsing coalition in the Netherlands and the deep unpopularity of the whole European project.
For all the crises and endless euro-summits the moment of truth for Europe has not yet arrived.
But it is discernible in the intolerable tension between economics and politics, a tension that has already exploded in Greece, Italy, the Iberian states and now the Netherlands, with France on the brink. The danger in this lies not just in economic dislocation; but in a loss of faith in democracy itself as a system of government that can deliver prosperity, stability and security. In his brilliant The Dark Continent, a history of Europe in the 20th century, Mark Mazower argues that it was by no means inevitable that parliamentary democracy would defeat dictatorship.
Today, it is by no means inevitable that people, widely disillusioned with the political classes and battered by austerity, will retain their affection for democracy and not look for salvation in different and less savoury forms of government.
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