In an article I wrote last May, I argued that Europe's future would be defined by a "new normal." The road to economic recovery would be long and painful, but thanks to aggressive intervention by the European Central Bank and the new continent-wide governance structures being put in place, the eurozone's collapse was no longer a serious risk. The credit ratings agencies now seem to agree. The year 2012 ended with Standard & Poor's upgrading its assessment of Greek sovereign debt. Last week, Fitch declared that the odds of a eurozone breakup are now "very unlikely." Although record unemployment persists in the periphery of the common currency area and growth prospects have dimmed for Germany and other core countries, there is a growing consensus that the worst may be over.
Instead of unraveling, as so many skeptics had predicted, European countries responded to the economic crisis by taking significant steps toward deepening their integration. The continent's leaders granted EU institutions greater control over the fiscal policy of member states, ratified a fiscal compact, and reached an agreement on the outlines of a banking union. European Central Bank President Mario Draghi emphasized the bank's commitment to do "whatever it takes" to save the common currency.
But this incremental deepening of European integration may come at a cost: Not all 27 member states want to be part of a closer union -- least of all the United Kingdom. Talk of a "Grexit" from the euro has been replaced by talk of "Brexit" -- a British exit -- from the European Union itself. Euro-skepticism in the United Kingdom has reached historic heights. The U.K. Independence Party, which is committed to London's leaving the EU, has overtaken the Liberal Democrats as the third most popular party. Recent polls suggest that a majority of British residents favor an exit. British Prime Minister David Cameron, facing enormous pressure from Euro-skeptic backbenchers in his own party, will soon deliver a major speech on the United Kingdom's relationship with the EU.