HANGING in the balance

Last week saw a prime example of how, in a union created to ease intra-European business and commerce, even the policing of the rules is political. The European Commission under Jose Manuel Barroso, reacting to a Continent-wide anti-Brussels backlash, appeared to retreat from advocating eurozone austerity. Allowing member states to overshoot the 3% deficit limit – a founding principle of the bloc – he cut troubled eurozone economies some slack.

Although it is Barroso's job to keep the EU, and especially the eurozone members, on the same reformist bandwagon, he also knows that the continent's youth unemployment crisis portends an explosion that could wreck the convergence work of decades. Already support for the EU is plunging. A paper by Pew Research this month saw a 15% decline in support between 2011 and 2012. The sharpest declines were in France and Spain, but there was also a significant decline in Germany.

No wonder the pragmatic – some would say fudge-happy – leadership of the EU allows the 3% rule to be temporarily overlooked. "A way must be found" to produce more jobs for the young. Or in the Commission's formulation, "fiscal consolidation should continue - albeit at a different pace".

The jobs crisis is certainly scary. In Greece, 59% of those aged between 15 and 24 are out of work; in Spain it is 55%. In Ireland, Italy, Portugal, and Cyprus, the figure is above 30%, and many other countries are in the high 20% range – and mostly rising. More than 7.5 million young Europeans are not in employment, education or training, with unemployment rates double that of adults and costing an estimated €153 billion in unemployment benefit, lost productivity and lost tax revenue.

The problem is that the solutions – such as improving competitiveness and promoting research and development investment – are hardly quick fixes. The threat of a European "lost generation" is looming large. Barroso said: "Since the current crisis is structural as well as cyclical, the pace of reforms needs to be stepped up across the EU to secure recovery and ensure the rebalancing of the economy."

The Commission's prescription is that countries in deficit boost their competitiveness, partly by reforms of over-regulated labour markets, and that the others remove the structural obstacles to the growth of their domestic demand.

"The crisis has left us with the strong conviction that we need to reform, and to reform now," added Barroso. "The cost of inaction will be very high. The benefit of taking action now is that Europe will emerge stronger from this crisis."

It does not help that Barroso's quid pro quo for slamming the brakes on austerity – that countries undertake structural reforms in return – has been greeted with an effective "whatever", not least from France, which openly bridles at being asked to open up restricted markets and loosen labour regulations. "France will respect its commitments - which we will do in our own way," snapped the socialist prime minister, Jean-Marc Ayrault.

The UK, with "only" 20% unemployment (and falling slightly), presents different questions for the integrity of the EU: the prospect of a poll in which one of the group's largest members might vote to leave, and another one in which part of a member aspires to become an additional member.

Although the SNP MEP Alyn Smith has been touring Brussels arguing that Scotland becoming independent would not set a precedent, even the Commission claims not to know whether other members with would-be breakaway regions – Spain, Belgium, France, even Germany – would be prepared to expedite Scottish secession. While the Commission stresses that a Scottish application for EU membership would be a matter for the member states, the body language from officials suggests they would prefer not to juggle this constitutional hot potato at this critical moment.

As things stand, although it suits politicians and the media to emphasise nuances, the UK has relatively smooth relations with the EC, just as the SNP government, along with the other devolved UK governments, rub along cordially enough with the Conservative/Liberal Democrat Coalition on European matters. Substantial rows – like last week's spat over the Commission's challenge to the UK welfare system – are rare.

In the same week, Westminster's response to the EC's new prescriptions for Britain's contribution to the desperately-needed economic revival in Europe was met with an 80-page document detailing how keenly the various layers of government in Britain are pursuing the Continent-wide 2020 reform agenda through the UK national reform programmes.

The EU's Country Specific Recommendations for the UK related to reducing deficit and debt, taming the housing market, improving employability of the workless, boosting lending, and investing in infrastructure, all of which are aligned with the aims of Whitehall as negotiated with Brussels.

While keeping things quite misty, the Scottish Government for its part has been highlighting "the unique characteristics of Scotland, and the distinct approach we are taking forward within the UK - [and Scotland's] distinct National Reform Programmes".

But for all this suggestion – made explicit in Deputy First Minister Nicola Sturgeon's speech to the European Policy Centre in February – of Scotland's desire to be a "proud" and "constructive and active" new EU member, Scotland's economic growth measures sit comfortably within the UK's National Reform Programme, supporting the wider aim of helping this ailing old continent to keep up with the vigorous new powers.

Measures include the Scottish Government's plans to build 30,000 affordable homes, a commitment to 25,000 new apprenticeship opportunities, the retention of the education maintenance allowance, Working for Growth ("a refreshed employability framework"), increased entitlement to pre-school education and an investment plan and support for new university-industry collaborations known as Innovation Centres, funded by £30 million from the Scottish Funding Council which may or may not materially promote Barroso's dream of a lean, efficient and newly-inventive Europe.

Although the Commission appears to have weathered the worst of the eurozone crisis, last week's set-piece presentation of the Country Specific Recommendations – the Commission's best shot at co-ordinating the economic direction of the continent – highlighted the continuing paradox of the EU's response to the crisis.

By attempting to accommodate the acute political needs of countries teeming with angry unemployed people, the danger is that the Commission – which enjoys "creative tension" with its member states – will weaken its hand for forcing through the structural changes that will create jobs in future. Faced with such complexities, it's no surprise that Brussels' mandarinate reserves the right to exercise a certain - flexibility.