Marked by a sovereignty debt crisis which threatened to develop into a contagion to tear the European Union (EU)apart, 2010 was perhaps the most turbulent year for Europe since the Cold War ended two decades ago.

The crisis, which initially bit into Greece and later put over-indebted Ireland in the jaws, disrupted Europe's financial markets while seriously compromising the credibility and stability of the EU's most prized project, the euro.

Although Greece and Ireland had respectively received rescue packages from the EU and the International Monetary Fund (IMF), countries fearing that the debt crisis could spread to other nations with heavy debt burdens have yet to see the light at the end of the tunnel.

Some may call it a crisis of confidence, but the year-long drama was deeply rooted in the "three imbalances" within Europe's development model.

The first imbalance exists between the integration of EU's monetary system and that of its economic and financial policies. While the single currency has facilitated growth of a highly integrated trade and service market in Europe, the region's labor market and research and development policies have remained rigid and inefficient. The lack of effective and unified fiscal policies and financial supervision has eventually led to heavy deficits and sovereign debts in some eurozone nations.

Secondly, the process of the continent's political fusion lags far behind its economic integration, as the milestone Lisbon Treaty was sealed into force only in December 2009, a decade later than the euro's birth. The imbalance has straitjacketed the eurozone's economic governance capacities, and encouraged European countries to prefer national approaches instead of European ones on some crucial issues, especially when the bloc fell on hard times.

The third disparity emerged between the "welfare state" model, so dearly enshrined in the hearts of Western European countries during the post-WWII period, and the surging trend towards a sustainable growth which calls for a poised calculation between efficiency and equality, market force and social benefits, and between contingent consideration and long-term interests.

In order to address these imbalances and overcome the debt crisis, the EU last year took a string of measures to forge a rescue mechanism for crisis-hit countries, strengthen economic governance, and to spur its checked economic recovery.

The debt-trodden European nations have spared no effort to reduce public spending and raise taxes to cut their fiscal deficits and regain investors' confidence. In the meantime, the European Central Bank has insisted in buying eurozone nations'government bonds in order to provide their financial institutions with accessible liquidity.

The EU has also beefed up economic governance by strengthening fiscal discipline, introducing a new macro-economic surveillance regime, bolstering coordination of financial policies, and pushing for a permanent rescue mechanism.

In October, EU leaders agreed on a comprehensive reform package to prevent recurrence of the pandemic debt trouble. At the last EU summit in December, European leaders went further to make limited revisions of the Lisbon Treaty, paving the way for the establishment of a permanent crisis resolution mechanism in the future.

The EU also approved a 10-year economic development plan in June, with focus on smart, green and sustainable growth to boost economic recovery through industrial restructuring and a change of the development pattern.

Despite the debt woes, Europe registered a faster-than-expected recovery in 2010, thanks to strong performance in the first half of the year, according to Xiong Hou, an European economy expert at the Beijing- based Chinese Academy of Social Sciences.

"There were two key factors that fueled EU's economic recovery in the first half of 2010, namely strong external demands for EU exports from developing countries like China, and positive effects of previous stimulus measures the EU countries had taken in response to the recession triggered by the financial crisis in 2008," Xiong said.

But he noted that the recovery started to lose steam in the second half of last year as a result of the deteriorating debt crisis and less favorable external demands, and meanwhile unemployment rate soared to a 10-year high of 10.1 percent in the eurozone as of October.

The European Commission in November predicted that the growth rate for EU countries in 2011 would fall from last year's 1.8 percent to 1.7 percent, and from 2010's 1.7 percent to 1.5 percent this year for eurozone countries.

It, however, expected a 2-percent growth rate in 2012, fueled by the resurrection of Europe's domestic demands.

Political integration still unfinished business

Despite the one-year-old landmark Lisbon Treaty, the prospect of a politically united Europe remains just as difficult as ever.

For one thing, the EU leadership and institutions as well as its member states are all preoccupied with such urgent issues as debt crisis, belt-tightening budgets, high unemployment, and economic recovery, which has made the political integration process marginalized to some extent.

For another, it takes time to smooth out coordination among the Permanent President of the European Council Van Rompuy, European Commission President Jose Manuel Barroso and the leadership of the EU Council Presidency, and to redistribute power among the European Parliament, the European Commission and the EU Council, and between EU institutions and its member states.

The confusion caused by such complexity could affect the work efficiency of the EU in an unwanted way.

To make the matter worse, big European countries such as Germany, France and Britain, pressured by the ongoing debt crisis, have tried hard to limit the transfer of sovereign powers in defense of their own interests, and they even would not shy away from publicly quarrelling with high-ranking EU officials.

Consequently, despite the EU's attempts to speak with one voice in order to win Europe a greater role on the world stage, Germany, France and Britain still seem to have a bigger say than the EU at multilateral international conventions like the G20 Summit and the G8 Summit.

Braces fro change

Yet one would have given some credits to the EU and admit that the bloc has been playing a more active role in the world arena during last year than before.

In 2010, the EU held summits with China, the United States, Russia, Japan and India. It strengthened the Eastern Partnership with countries to the east of the bloc, and pushed forward geopolitical cooperation with the Middle East, North Africa, and North Caucasus.

In the meantime, the EU held ministerial meetings with nations in the Latin America, the Caribbean region, Africa and the Association of Southeast Asian Nations (ASEAN) to highlight cooperation with developing countries and regions.

Moreover, the bloc has played an important role in the Iranian nuclear issue negotiations. Just last month, High Representative Cathy Ashton, on behalf of the five UN Security Council permanent members plus Germany, attended talks on the Iranian nuclear issue in Geneva along with Iran's chief nuclear negotiator Saeed Jalili.

Meanwhile, the EU has decided to enlarge the scale of its strategic partnership around the world. While continuing to strive for closer ties with such strategic partners as the United states, China, Russia, India, Brazil, Japan, Canada, Mexico and South Africa, Ashton has expressed the bloc's readiness to expand the list to include Egypt, Israel, Indonesia, Pakistan, Ukraine and South Korea.

Hopefully, the newly launched European External Affairs Service (EEAS) chaired by High Representative Ashton would further help protect the bloc's interests by magnifying its global influences in a way that would lump together the diplomatic resources of its 27 member states.

The 27-nation bloc admits that it has entered a transitional period after it was hit by the financial and debt crises, which have put the EU, with a history of more than 50 years since the Treaty of Rome was signed, under unprecedented tests.

In the year to come, the EU will face even more daunting challenges as the debt crisis might flare up again, economic recovery might slow down, and political and diplomatic tangles might pop up at unexpected moments.

Still we have every reason to believe that the EU will deepen its reforms in the economic, social, diplomatic and all other sectors, so as to sail through the debt crisis, strengthen its political integration, and come out of the crisis stronger.