The tragedy of Europe has been foretold in the fable Two Boats and a Helicopter. A priest finds himself trapped by a flood. A canoe comes by. But he declines the invitation to step in on the grounds that God will save him. The waters rise further. A motorboat comes, and the captain invites him on board. He stays put. Finally, a helicopter arrives, but the priest still declines. He drowns, and when in heaven he asks God why he did not help him. God says back: I sent you two boats and a helicopter. What else did you want me to do?

God sent Europe a sovereign debt crisis, a pandemic, and Vladimir Putin. And Europe says thank you, but no. When the crisis comes, we will unite.

The story of Europe is still open-ended. We are still in the middle of it. My expectation is that it will not be the ever-closer union that many of us pro-Europeans used to believe in. I see today’s Europe in a position similar to that of the Habsburg empire in its final days – wealthy, saturated, intellectual, and cultured, but doomed. No policy advice could have saved Franz-Joseph. It is in this vein that I find I find the question of how to fix Europe’s multiple economic and foreign policy problems relatively uninteresting. It is a question I used to ask myself for many years.First in the 1980s and 1990s when the EU created what it misleadingly called an economic and monetary union. Or in the 2000s when we talked endlessly about structural reforms. After the global financial crisis and the ensuing sovereign debt stress for the euro area, we talked about a fiscal union and sovereign debt instruments.

If you asked what the EU needs right now, I would say all of the above, and then some. There were no majorities for any of these ideas back then. Even the proposals were mostly timid. Remember the blue-bond-red-bond idea of a eurobond? Nobody dared suggest the real thing. Or its baby brother, the debt-redemption bond? Or their poor cousin, the eurobond that was a just a basket of existing bonds? None of them would have done the job. And yet they all failed because member states did not want to abandon even the slightest degree of national sovereignty. If we want to stem against what is coming at us from the US and China, we will need the real version.

In this decade, the EU’s ambition is much reduced. Europe’s overhyped single market is not what it says on the label. According to the IMF, the internal barriers are higher than Donald Trump’s tariffs. After giving up on the single market and economic union halfway through, the EU now has its eyes on the next project to be abandoned mid-way, the defence union.

I date the moment of no-return for European integration to the summer of 2012, the height of the sovereign debt crisis, when EU leaders ended their talks about a fiscal and political union in favour of an ECB-led bailout. Up until 2012, a fiscal union was at least a possible future scenario for the EU. Back then, my newspaper columns came with policy recommendations week in, week out. But what is the point these days of advocating a capital markets union?  There can be none without a fiscal union and a sovereign debt instrument. Both, in turn, require at least a small political union. There are no technical solutions that get us around that.

The EU has resigned itself to becoming a rules-based union whose core activity is to manage transfer payments. I recall pro-Europeans in the UK hailing the lack of political union as an argument in favour of Remain. I am not surprised to see that such a Europe failed to inspire.

I have concluded that there is no direct path from where we are today to a political union, and that there is no point in trying to pretend that we have an integrated economy and capital market. There will be something that pretends to be a capital markets union, but it will not redirect the private sector’s savings to profitable investments. You will not see it in the national accounts. Just as nobody managed to see the recovery fund in the macro statistics. This did not stop its advocates from celebrating the Hamiltonian Moment.

The choice the EU made will have long-term consequences. Europe will fall further behind in technology and innovation, in entrepreneurial opportunity, in productivity, and all the other metrics with which we compare economies. Because all of these things require a barrier-free market for goods, services, and capital. Europe does not need a political union to complement the single market. It needs it for the single market in the first place.

Even if the EU fails, it will still be a nice place to live, as Austria was before World War I. The Habsburg empire broke up violently because it complacently stumbled into a war. I am not predicting that the EU awaits the same fate. Nor can I rule it out, given the currently militaristic mood in European capitals. But my analogy with the Habsburg empire ends in 1914.

What I can see happening going forward is for member states to take more regulation into their own hands and to undermine the EU’s single market and its competition policy. The new coalition in Germany just reformed its domestic fiscal rules without any co-ordination with European partners. It did so again for the electricity price subsidy for industry. They hope to find a way around the European rules and the objections of other member states. They will probably end up finding one.

So here is one plausible ending for my fable “A War, a Pandemic and a Dictator”. Everybody will find ways around each other. One day we will wake up and have forgotten that the EU is still there.