I am one of those who are concerned about the future stability of Europe. Increasingly, this has become tied to the fate of the euro project and to the success or otherwise of policies followed to tackle the crisis that has plagued the project in recent years.

Time has confirmed original misgivings about the euro. As established, it was inherently flawed. Monetary union was launched lacking the vital economic instruments – whether centralised or federalised, call them what you will – that would have made such a union coherent. The reason for this was that neither the governments nor the peoples of Europe wanted to give up their sovereignty.

Moreover, the euro project took shape when affairs were increasingly determined by the growing scope and scale of globalisation, with financial markets and information technology as the dominant motors of economic development. This reinforced the difficulties arising from the flaws in the eurozone design, at a time of global financial crisis and its aftermath.

Two other developments continued to have an enduring effect on eurozone performance.

First, it would seem that in a general sense, Europe has allowed the diversity of its productive base to shrink excessively. Under the call sign of restructuring, too wide a range of productive activities has been merrily outsourced, reducing the flexibility of national economic systems to cushion the effects of crisis.

Secondly, a major target set for the euro project was to promote the convergence of the component national economies. In effect, the contrary has happened. The existence of a common currency initially served to mask divergences. Now, it is serving to highlight them. Perhaps here we have the most crucial problem of all.

To defend the integrity of the euro, the zone’s decision makers have adopted a two-pronged approach.

On the one hand, they have sought to enforce the principles of the Stability and Growth Pact, which, starting 1997, formed the conceptual basis for the eurozone’s formation. The Pact set guidelines for member states to follow in curbing budget deficits, national debt levels and inflation. It was mainly honoured in the breach. Now with the fiscal pact and the directives by which the European Commission will vet and supposedly correct national budgets, targets set by the Stability and Growth Pact are in the process of becoming mandatory.

In second place, decision makers progressively abandoned their starting principle that national governments in financial trouble should deal with the problem expeditiously all by themselves. We are now at the stage where a permanent mechanism is being set up, worth €700 billion, to bail out under strict conditionality the finances of members states in trouble.

Both approaches have had their share of criticism. Mandatory controls to ensure that governments balance their budgets and reduce their national debt will probably slip or become inoperative when the bigger eurozone economies are involved. Also conceptually, it is difficult to see how feasible it will be to run a monetary union in which each one of its many component parts is to maintain an internal balance.

With regard to the support funds that have been set up, the criticism has been that too little was done too late.

Meanwhile, the peoples of Europe find themselves completely outside the decision-making structures where decisions regarding the euro are being taken. Such decisions refer to financial and technical considerations that lie totally outside their interest, knowledge or experience. Yet on their basis, the lifestyles of whole strata of European society have been affected negatively by decisions taken to “defend” the euro. When governments are changed in reaction, the new administration carries on with the policies of its predecessor. Under pressure from the eurozone, it makes them tougher.

Given existing structures, eurozone governments cannot really prevent the worries about budgetary stability from spreading. Blaming this on speculation in global financial markets contradicts the overriding ideology, to which it seems we all must subscribe, that globalisation within the parameters of generalised free trade is beautiful. Inside the eurozone, the only way to preserve national budgetary stability is through internal devaluation. The resulting austerity is hurting many, many people.

Logically, the need is for the establishment of economic union to complement the monetary one. Halting and piecemeal steps are being taken to build structures that would approximate to such a development, like the present initiative to organise a so-called banking union. These moves are being justified on the grounds that if eurozone governments or their banks are given support to overcome budgetary and/or economic difficulties, then they must allow those who aid them to centrally supervise and control their conduct of affairs.

Those who favour deeper political and economic integration in Europe, project what they believe is a more positive way of looking at things. They claim that to put the eurozone house in order, what is needed is “more Europe”. By this, they mean full economic union amounting to a politically federated European entity.

National sovereignty would have to be given up in a big way. That would certainly solve the “technical” problem of the euro’s design. However, there is no mandate for it among the peoples of Europe.

Already, the piecemeal steps that have been attempted – vital though they were given current circumstances – lack democratic legitimacy. They were rammed through national legislatures on a take it, you can’t leave it, basis. They have created huge popular resistance among citizens in countries where economic performance was non-problematic, because they considered their tax money was being diverted to subsidise undisciplined big spenders. And correspondingly, citizens in countries where austerity programmes have been imposed in return for being bailed out have protested widely because social justice and fairness are being destroyed.

Existing EU structures are not providing democratic legitimacy. The intergovernmental nodes at the levels of European Council, Council of Ministers and euro group are rightly seen as slow to react to events in global markets. Their responses are likely to be contradicted and changed within months, if not weeks.

The European Commission and its President, as well as the President of the European Union, function mainly as the high representatives of a technocratic black box. Their frequent calls for the adoption of a so-called “Community” method sound incongruous.

And with all respect, the European Parliament is having little relevance in bringing democratic legitimacy to European economic governance, least of all – for obvious institutional reasons – where eurozone matters are concerned. Indeed, it may have been a mistake to separate some years back, the European Parliament structurally from national parliaments.

Nor have the latter been bringing democratic intelligibility or legitimacy to economic governance. If intergovernmental structures have been simply responding to the pressures of financial markets, national parliaments – as already said – have mainly been cast in the role of endorsing decisions taken centrally, frequently when such decisions are already being overtaken by events.

So, what should be done?

Clearly, there is no magic painless solution. For instance, the frequently cited proposal of mutualising state debt within the eurozone should carry wide-ranging political implications if it is to make sense. It would have to follow from a further substantive erosion of national sovereignty through federalisation of economic decision-making. It does not make sense for countries which would have to pay higher interest rates on “their” debt under mutualisation, to let others which will benefit by paying lower interest rates continue to have a free hand with lax budgetary policies.

Still, it is doubtful whether mutualisation of national debt would resolve the dilemmas created by the euro crisis. The deeper problem will remain: there are grouped national entities within the zone that have widely diverging economies. These are now being accommodated within existing EU structures, even if with some difficulty. In a monetary union operating in the context of globalised markets, such an accommodation cannot but be subject to ongoing instabilities. Effectively, the eurozone as configured at present is not an optimum monetary area.

So what should be done to make economic governance democratically legitimate?

If things were to be done transparently, a root and branch review of the eurozone project would need to be carried out. All options would need to be considered, including that of determining what the boundaries of the eurozone as an optimal monetary area could be, subject to further expansion at a later stage.

For if the parameters that define the euro project fail to make economic sense, then any political arrangements meant to provide legitimacy will remain ineffective. There would have to be a rethink leading to consensus, about how political legitimacy can be constituted, both within a redefined eurozone and within the wider European Union.

Some of the ideas that have been mentioned, like electing directly the President of the Union seem to me to be half baked, unless it is being proposed that he would be vested with powers equivalent to that to the US president. But as far as I can tell, there is no constituency for such a change in most European countries.

In any event, the reality is that the eurozone project remains a political project, designed and implemented by a European elite that is committed at all costs to maintain it. Worries about democratic legitimacy are marginal to its concerns, as has been shown over the years when proposals like the European constitution were voted out. These elite considers the euro project as an indispensable instrument by which to achieve full political and economic integration in Europe. Indeed, the call for “more Europe” would seek to turn the euro crisis into a new opportunity for further political integration.

As a result, it is likely that the eurozone crisis will continue to be managed by muddling through. In the context of globalisation and given its internal divergences, this could continue to undermine the eurozone’s growth potential. Meanwhile, political leaders will have to ride through mounting popular dissent at the consequences of the internal devaluations made necessary by the logic of the zone’s architecture.

This is why I share the concerns of those who fear that Europe could be entering an unwelcome phase of instability.

Dr Sant is a Member of Parliament and a former Prime Minister and Opposition leader