In the cold light of New Year’s Day, it is somewhat difficult to repeat the optimistic mantras of the previous night – that everything will turn out well – but equally to revisit the nightmares that the new year will bring all sorts of cataclysms with it.

There have been many Cassandras in the past months who glibly prophesised the demise of the euro and the economic system it underpins. There were times when this apocalyptic scenario was not at all that unrealistic, especially after April 2010 when all Europe wrongly believed that solving Greece’s immediate problems would suffice, when it turned out the package quickly concocted was not enough, and then when suddenly Ireland began to disintegrate, when the full extent of its banking crisis became apparent and it was indeed too big for just Ireland to carry.

Politicians have been blaming the braying pack of speculators for whatever happened in the past months, but actually, the market was reacting in the only way it knows and it was the euro itself, put together by politicians with lots of promises that were never delivered, without the safeguards that it should have had, the fiscal unity and the single market that should have underpinned it, which was so weak that it was simply unsustainable.

But then, instead of the euro disintegrating, and instead of the eurozone going into meltdown, shocked by the realisation that even the defaulting of a single eurozone member state could start the disintegration of the entire system, Europe was forced to come together and rescue the economies at risk. It was not easy to persuade the Germans to come to the help of profligate Greece, nor was it easy to get the British to help the Irish, but that is what has been done.

As a result, we are all here on New Year’s Day 2011. It could have been worse, much worse. Ever since that Saturday in September 2008 when the Hungarian florint was almost annihilated, when the banking crisis had yet to hit Iceland, when the world’s economic system looked like it was about to implode, much has happened, and much has been done.

This is not to say we’re out of the woods. Only a fool would dare say so. To list the still outstanding risks would bring me dangerously near to repeat the Cassandras’ mantras.

Some things are becoming progressively clear: it is not easy, it’s almost impossible, for countries to leave the eurozone especially when they are in a weak position (but I also suspect it is equally impossible for Germany to leave the eurozone which offers it such an inimitable hinterland).

Now one could interpret this statement to signify that the countries caught in the euro are condemned to stay in it. But it would probably be more precise to say that the countries ‘caught’ in the eurozone are forced to repair the basis of the single currency and possibly also underpin it and make it work better.

Slowly, the basis of what could be the future configuration is emerging from the gloom and mist. Will there be a European bond or not? Will the EFSF be replaced by something of a more permanent nature or will it not?

Greece was an issue of a country whose public finances were dodgy, but then this was definitely not Ireland’s case – and yet Ireland risked a far greater collapse and had it been allowed to, it would have dragged down most of Europe with it. In Ireland’s case, it was an issue of the private sector and banking rather than the public sector, which was the problem. In the end, the country, the State, was embroiled because it could not be kept out of the private sector mess and could not let the private sector pick up the pieces all by itself.

What was wrong with the euro was not the result of the Gnomes of Zurich, or George Soros, or anonymous and bonus-laden fund managers but, far more simply, the natural result of economics, according to all the best textbooks that treat economics as a science rather than winning the lottery. Greece’s economy was unsustainable because the numbers could never match. Actually, Greece (and other countries besides) was made to feel far more secure than it should have been by the euro, with those figures.

Ireland was unsustainable because its loosely-regulated financial systems were built on an unsustainable property boom that just kept increasing when there was no real market.

Just as, in a way, the Lehman Brothers collapse disproved there are some banks which are too big to be allowed to fail, so too this crisis is disproving that a country, any country, is too important to be allowed to fail. Even if they are in the eurozone, even the eurozone itself. There is nothing that is guaranteed not to fail unless the right economic lessons are learnt.

Proving that European solidarity is not just a slogan but a reality has been one of the unemphasised gains of 2010. That’s fine, but on its own it will not work for long. It was right that the saner members of Europe underscored the need for delinquent countries to come in line. It’s not a question of Germany and the Nordics imposing a Nordic austerity on the fun loving, sun drenched countries of the South. Again, it was simple lessons of economics.

This however brings us to further questions, further issues whose importance will become apparent in the coming months.

I may be wrong, but I do not subscribe to apocalyptic visions of riots and popular turbulence, social tension and urban guerrilla warfare as the future of Europe. Certainly, there have been riots in Athens as well as in London, in Rome as well, but they were mainly sporadic and one-offs. The people of Latvia have taken a punishment we would not like to inflict on our enemies. So too the people of Ireland. The rollout of Cameron’s austerity decisions is still to come in the coming months and, as for Italy, the riots there were mainly political in intention.

The issue of the coming months is rather how not to allow the austerity measures to strangle any hope of economic recovery and growth. That is still tricky and no answer has yet been found. In Japan, the stagflation wasted an entire decade and it’s still not working. When countries have a 20 per cent unemployment rate and when the rate is far larger among young people, that is surely something to worry about, far more than about a riot or two in the streets. It is precisely why David Cameron’s decisions on graduate fees is so wrong – the worst thing that countries can do to themselves is to drive an entire generation or two to despair when they should look forward to a better future.

On the other hand, those who pooh-poohed the euro – like Hungary’s Viktor Orbàn – have had to eat humble pie: Hungary’s credit rating now is just one notch above junk bond level. And the current President of the European Council is being made to eat all his rash populist promises he can never deliver. Not to worry – his immediate predecessor as Council president spent six months wondering whether Belgium was about to disintegrate or not. Spain’s Zapatero, who at first denied the country had structural problems, has been forced to retract so many Socialist gains that not even his opposing party, the Centre-Right, would have ever dared do. Ditto for Greece’s Socialists.

In essence, Europe has been drawn more together by this crisis than it was before. At the same time, it is no longer a unified, monolithic Europe, but an even more variable geometrical Europe, at different levels, at variable speeds – A Europe inside the eurozone and one outside it; the latter split between countries such as Britain which will never become eurozone members and countries that one day will (or may) become members. It is a Europe where the single market is not yet in existence, certainly not in the services sector, but equally in the freedom of mobility of workers sector. Yet it has not (or should one say, ‘not so far’?) disintegrated into each country on its own and for its own.

The past decade’s euphoria about a mass expansion of the EU to add 10 new members, and two more later, is now the past. The present is discovering whether the union is a paper-thin or cosmetic one or a real union based on solidarity and diversity.

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