Eurozone tackles 'art of the possible'

They were handing out blue and yellow sweets marked with the symbol of the euro at the Economic Forum conference in Brussels, but the much-battered euro has left a sour taste across Europe and beyond.

The President of the European Council, Herman Van Rompuy, said: "The next steps will determine the fate of our economic and monetary union."

Some critics claim that not enough has been done to reassure the financial markets, which have been unnerved by worries over sovereign debt levels in the eurozone.

"There is turbulence in the markets," said Olli Rehn, the European Commissioner for Economic and Monetary Affairs, "but it is better to do something to reinforce the confidence than only speculate on the reasons".

He told BBC World Service Business Daily that deciding economic policy in Europe was a mixture of will and the "art of the possible".

"We took decisions as soon as it was possible on the basis of unanimity of the European Union," he said.

European leaders were meeting at the Economic Forum conference because of the serious debt problems of Greece, Spain and Portugal.

Their mission was to stem the possibility of panic and prevent the crisis from destabilising the economies of the other member states.

Despite emergency measures worth 750bn euros ($975bn; £650bn) to prevent the Greek debt crisis from affecting other eurozone countries, the euro has been under intense pressure.

Beneath the surface jollity, there was an undercurrent of fear running through the event about whether the European project itself could be threatened by the current crisis.

Among the reforms Mr Rehn was calling for to boost economic growth was the improvement of the labour market to encourage productivity growth and to reduce unemployment.

There is a clear case for economic reform in Spain, he said.

"In Spain, there is 20% unemployment and they have an archaic system of a two-tier labour market."

But, he added: "It is important we don't try to imitate any other social models and in my view, the European social model is the foundation of European social and economic development."

He says the European model should be kept, but modernised to reach the challenges of the 21st Century.

"If we are not able to reform the European economy, then we simply cannot afford the welfare societies, because of the very high burden of debt," he said.

"We need to have fiscal consolidation and at the same time mobilise growth, so we have a more dynamic economy which is able to carry the welfare society."

He maintained that, with the current debt levels, the welfare system is already under threat.

Some observers believe reforms will lead to more political integration to restrain tax and spending across Europe to recover from the debt crisis.

"It will not lead to any fiscal federalism, but it should lead to reinforced economic governance," he said.

"But if you are in the same boat, you should try to row in the same direction."

Critics believe there are fundamental flaws in the euro, and although it has survived in the good times, it is unworkable in a crisis.

"We have had 10 good years for the euro - with increased investment and reduced interest rates. It has also provide a protective shield for its members during the recent crisis," he said.

"But it also has certain systemic weaknesses and we have now made concrete proposals to address these weaknesses and to reinforce economic governance."