Among all the discussion of the possible flow-on consequences of the global financial crisis, one which may have very significant long ramifications is the impact on the long-term future of Europe as a political and economic entity.

Nobel Prize winning economist Paul Krugman questions whether European governments were wrong to let themselves become so tightly integrated, and “in particular, (whether) the creation of the euro was a mistake.”

Poor leadership is part of the story. European banking officials, who completely missed the depth of the crisis, still seem weirdly complacent. And to hear anything in America comparable to the know-nothing diatribes of Germany’s finance minister you have to listen to, well, Republicans.

But there’s a deeper problem: Europe’s economic and monetary integration has run too far ahead of its political institutions. The economies of Europe’s many nations are almost as tightly linked as the economies of America’s many states — and most of Europe shares a common currency. But unlike America, Europe doesn’t have the kind of continentwide institutions needed to deal with a continentwide crisis.

This apparent structural weakness of the European Union in a time of major economic crisis provides a lesson as Australia embarks on slowly moving towards closer cooperation in our region.  Not that we’re likely to see any sort of economic or political linkages with neighbouring countries along the lines of what occurs in Europe happen in my lifetime – apart from the probability of even closer ties with New Zealand.

Europe as a united entity is unlike to start splintering. But not only is there a possibility of a major shift in the way Europe operates in the international arena. It is possible that Europe as an entity lacks the authority and political capacity to respond adequately to the current economic woes, which makes it more difficult for the world as whole to recover economically from the current financial mess.