The unification of Germany in 1990 was one of the most significant events since the end of the Second World War. Just four and a half decades after a defeated, impoverished, and despised country had been divided by its enemies, a democratic colossus at the heart of Europe was born in peace.

While hindsight might suggest otherwise, it was never inevitable that the collapse of Soviet power would be followed by the unification of German. In truth, the probability of such an outcome was low in the face of the many barriers confronting Chancellor Kohl in those heady days of 1989/1990.

The economic challenges alone were daunting. For most economists, the joining together of a wealthy and dynamic market economy with its poor and stagnant centrally planned neighbour must take decades. Whatever the political arrangements, economic rationality demanded that the path to German economic and monetary union would have to be long and slow.

This was certainly the view of the widely respected President of the Bundesbank at the time, Karl Otto Pohl. In his eleventh year as President, the most respected central banker in the world demanded that economic rationality trump political aspiration. More specifically, he demanded that the Ostmark be valued at a fraction of the Deutschmark.

But Chancellor Kohl made the historic choice demanded by politics. Each Ostmark was exchanged for a Deutschmark. Political imperative trumped Bundesbank orthodoxy, Otto Pohl was out, and Germany was unified.

More generally, the history of Europe is arguably a series of such key moments. These were often violent clashes where the outcome was finely balanced. Imagine if Von Blucher had not saved Wellington at Waterloo, or if the Red Army had buckled before the winter freeze at Stalingrad? 

Away from the battlefield, ponder the Europe which might have emerged if the Anglo-French approach at Versailles had been more like the US approach at Bretton Woods, or if Gorbachev had followed the Soviet playbook of ‘56 and ‘68 when faced with the convulsions of ‘89? Soberingly, our future has often been shaped by a key moment or a crucial turning point.

Ten years ago, the Eurozone was in crisis. The chasm between punitive peripheral yields and stubborn core orthodoxy seemed unbridgeable. In an interview at the time on the BBC’s ‘Newsnight’, the Nobel laureate Paul Krugman summarised the conundrum:

‘Something impossible is going to happen. One is that the Euro will be allowed to collapse. The other is that Germany will accept lots of debt relief plus inflation plus temporarily large open-ended lending. One of these two impossible things is going to happen.’

During those tumultuous days, the Summer Olympics in London was a triumph. Confident and optimistic, for three special summer weeks the exuberant UK capital welcomed a rapt global audience to share and enjoy its wonderful environs. Today, as its government and country fracture, that faraway summer by the Thames is ironically best remembered for the triumph of a visiting policymaker from Europe.

Crucially supported by Chancellor Merkel in Berlin, the then President of the ECB, Mario Draghi, solved the Krugman conundrum with his famous promise in London:

‘Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.’

Ten years later, his successor, Christine Lagarde, is grappling with a fresh wave of doubts about the Eurozone. Interest rates are rising, economies are slowing, and bond spreads are widening. The voices of Eurozone sceptics – silenced by Draghi in London – are audible again.

But they are also mistaken again. This week will see the ECB unveil its latest tool to fulfil the Draghi promise. Crucially, the ‘anti-fragmentation instrument’ will enable the ECB to ensure the stability of the Eurozone. All else is detail.

In a narrow sense, for those of you who must own bonds, you should loan money to the Italian Government for ten years at an annualised rate of almost 3.5 per cent, rather than loan money to the German Government on the same basis at around 1.25 per cent.

More broadly, the euro is firmly on the path to have the fiscal and political underpinning to rival the $. Galvanised by the pandemic, the EU decided to borrow as a collective. The crucial principle to pool fiscal sovereignty is established. By many measures, the Eurozone economy has already over-taken that of the US. Its exports are nearly double its counterpart across the Atlantic, while its payments position with the rest of the world is in broad balance, compared to the persistent deficit of the US.

Fundamentally, a union that has evolved from the rubble of 1945 to take its chair at the top-table of the evolving multi-polar world has arrived. Lagarde is set to join Kohl, Merkel, and Draghi as the latest architect of greater monetary integration in Europe. As destruction is rained down on Ukraine, the political imperative to ensure Eurozone stability is overwhelming.