EUROPEANS have learned to let their attention drift when Brussels starts droning on about “process”. But every so often, a change in the mechanics of the European Union really does matter. Just such a moment looms next month, at the first summit meeting of the euro zone ever to be held, when Germany's Angela Merkel and France's Nicolas Sarkozy will press for agreement to a “pact of competitiveness”—part of a grand bargain under which more money will be made available to bail out troubled euro-zone economies, with perhaps more flexibility in its use. The pact sounds technical, but it foreshadows something much bigger: a closer integration of the euro zone that could hold threats for the entire EU.

Details, details

On the face of it, the pact is about bolstering the economic bit of Europe's economic and monetary union (see Charlemagne). Germany's desire for more intrusive controls over euro members' fiscal and economic policies is understandable after last year's bail-outs. And the competitiveness pact includes some sensible ideas, including raising retirement ages to 67 and scrapping indexation systems that link wages to prices—though these will be hard to agree.

But the pact does little to resolve the euro's current sovereign-debt crisis (see article). First Greece and then Ireland have been bailed out. Portugal may be next. Yet though this may buy time, it fails to recognise that Greece and maybe the other two as well are insolvent. Unless other euro-zone members (for which read Germany) are prepared to make large fiscal transfers, which is unlikely, there is no alternative to debt restructuring—and it would be sensible to start this now.

The pact also includes ideas that are not just unhelpful, but also damaging. One is to impose constitutional amendments to enforce balanced budgets, which are too rigid in a system without a big federal budget. Plans to harmonise tax bases could too easily evolve into minimum tax rates. Harmonising educational qualifications could also turn into just another way of inhibiting competition.

It is not just the countries involved that are threatened by closer integration: it is the EU as a whole. Many euro-zone countries are instinctively interventionist, hostile to unfettered competition (including tax competition) and overly sympathetic to state aid for industry. The European Commission will no doubt continue to defend the EU's single market, with the support of several euro-zone members (such as Austria, the Netherlands and Slovakia). But the liberals are a smaller minority in the euro zone than in the wider EU. Indeed, this is why the French always wanted a bigger political role for the euro group—and why the Germans long resisted it. The euro crisis has shifted Mrs Merkel into backing closer integration of the euro zone.

This should also worry EU countries outside the euro, including Britain, Poland and Sweden. Mrs Merkel and Mr Sarkozy have invited all EU members to join the competitiveness pact and submit to tougher fiscal scrutiny, but they are unlikely to do so unless and until they adopt the euro—and a more integrated and less liberal euro group might make joining the euro less attractive, for instance by opting for more harmonised taxes and social policies. This could even put at risk the EU's single market. Already, some euro members hint that Britain, Poland and Sweden had an unfair advantage in 2009-10 because they could regain competitiveness by allowing their currencies to fall. It is easy to imagine such complaints leading to changes in the rules over state aid or to attacks on the four freedoms of movement—of goods, services, capital and labour—that underpin the single market.

Explore our interactive guide to Europe's troubled economies

There is nothing wrong in principle with the idea of some EU countries going farther and faster towards political integration than others. Not all now join in the euro, the Schengen passport-free zone or European defence. Having a variety of subgroups can accommodate both those (like Belgium) that want closer political union and those (like Britain) that do not. But if the euro group turned into a protected core that agreed economic and social policies without heeding the rest, it could split the union.

The British government seems entirely happy to sit on the periphery. The Swedes and Poles are not. They are openly fretting that a more politically united euro group of 17 could divide the EU of 27. They are right.