The eurozone is grappling with an identity crisis that is set to dominate the next six months, if not the next few years, of its existence. The bloc's response to the crisis - particularly the recent fiscal problems that have engulfed Greece and Ireland, and are now knocking on Portugal's door - has drawn criticism from the most respected international policy makers, most recently the IMF's Dominique Strauss-Kahn, who said, on 8 December: "The situation in Europe remains troubling and the future is more uncertain than ever."

He criticised Europe's "case-by-case" approach to the crisis, and prescribed instead a speedier and more coordinated response, especially among the soon-to-be 17 countries sharing the euro. "If the eurozone does not pull itself together quickly enough, it would risk having periods of very slow, difficult growth, that it could avoid on condition that its governance is greatly improved," he said.

Meanwhile, in its latest financial stability review, the European Central Bank, which continues to prop up several eurozone governments and banks via bond purchases and cash injections, says the banking situation is still "fraught with risks" that could yet infect other countries. "Increased cooperation, at the very least to assess the vulnerabilities related to cross-country contagion, is necessary to secure stability in nancial systems comprising several nations," it warns.

It is into this fraught atmosphere that Budapest steps, on 1 January, where it will be expected to lead talks on dossiers as weighty as a permanent bailout fund, treaty change and an overhaul of the Stability and Growth Pact. This is aside from the numerous measures in the internal market pipeline to bring the financial sector to book for the crisis. At a glance, Internal Market Commissioner Michel Barnier has at least 13 legislative initiatives pencilled in for release in the first half of next year. The obstacle he will face, says Nicolas Veron of financial think tank Bruegel, is that he and his colleagues are trying to firefight the crisis at the same time as launching the new rules.

"The EU is still in the midst of a financial crisis even as it has started a number of long-term financial reform efforts," he wrote recently in a policy paper. "Major further challenges loom," he added, "including ensuring a smooth start to the activities of the newly created European [supervisory] authorities; creating a sustainable framework for cross-border banking crisis...

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