“LA RENTRÉE”, the start of the academic year, is a time of dread and hope for pupils. And so it is for the euro zone’s political class. Its performance last year was mediocre at best, but not as dire as in the previous two years. A chaotic breakdown has been averted. Greece, the worst kid in the class, avoided expulsion (and will get extra help). Latvia, the poster child for austerity, will join in January, while Ireland should graduate from its bailout programme. These days investors are fleeing emerging markets in other parts of the globe, not the old continent.

One reason for hope is that the economy is returning to growth or, better said, it may have stopped shrinking. The fear is threefold. First, any growth may be so anaemic that unemployment will for a long time only worsen. With that, European politics may be destabilised and polarised, with dejected voters turning to fringe parties. Third, without a fear of impending catastrophe, incentives lessen for debtor states to make needed changes and for creditor countries to reform the euro zone.

Much is still to do, but time is short. Banks need to be fixed and an emerging banking union must credibly spread financial-sector risk. Labour and product markets have to be liberalised; the European Union’s single market needs to be deepened, particularly in services; and a big trade deal struck with America.

Yet this will be an unusually short school year. For now, there is little haste in Brussels. The European Parliament, which must approve almost all new legislation, will cease working by April, ahead of its election in May. The headmistress will be late. Angela Merkel, the German chancellor, is busy with her re-election, and little of substance can be decided without her. The euro crisis has been a secondary issue in the German campaign until recent days, when the finance minister, Wolfgang Schäuble, broke an unspoken pact not to talk about Greece until after the September ballot. Greece needs more billions to keep going, and the IMF insists that the hole be filled this year. Yet more loans will do little to help a country that cannot repay them. In the coming months, therefore, Germany and other creditor states will have to write off part of the loans they made. The least obvious way will probably be by extending their maturities.

The other big issue is the creation of a European authority to wind up and restructure bust banks, using pooled European funds if necessary. Germany does not want to pay for other countries’ banking failures. It says the commission’s proposal, tabled before the summer break, breaches current treaties (not true, say Eurocrats). Whether this argument is just pre-election bluster may not be clear until the end of the year. In any case, one should not expect big change from Germany. Whoever becomes chancellor (almost certainly Mrs Merkel) will perform the same balancing act: minimise Germany’s liabilities, but ensure that the euro does not break apart.

In a grouping of democracies, national politics is a necessary intrusion. This is true even of smaller countries. Austria and Luxembourg, for instance, will hold ballots in September and October respectively. The outcome will shape the debate on ending banking secrecy in the European Union and exchanging information on tax evasion. A bigger worry than the political calendar is unscheduled elections and “political accidents”. The hard-pressed Greek government is down to a wafer-thin majority, while a row over austerity rattled the Portuguese coalition earlier this year. In Italy Silvio Berlusconi, the scandal-tainted tycoon and leader of the centre-right, had threatened to bring down the government after his conviction for tax fraud was upheld.

A near-certainty is that the next European Parliament will include a lot more Eurosceptics. Some, such as Nigel Farage of Britain’s UK Independence Party, have used their seat in Strasbourg as a launch pad into national politics. Rattled mainstream parties of left and right can only hope that the sceptics will dislike each other as much as they detest the European project.

The political climate hampers reform. And governments will not take kindly to Brussels telling them what to do. The test is France, which is shy of change despite rising unemployment, an oversized state and a loss of export competitiveness. It has already told the European Commission not to “dictate” reforms. Yet new powers this year will give Brussels an even more intrusive role in monitoring budgets and economic policies. This is not the kind of “economic government” France wants.

In part to tame sceptics by setting out a positive vision of Europe, and in part to create a legacy after his two terms as president of the commission, José Manuel Barroso will unveil proposals early next year for the creation of a “federation of nation-states”. What this means remains unclear. But for most governments, a new EU treaty is a dog best left sleeping. Any new treaty has to be ratified by 28 members, often through unpredictable referendums. Few want to make it easy for Britain to renegotiate the terms of its EU membership before calling a referendum by 2017.

Emergency exit

In case all these problems become too intractable, France and Germany have prepared an escape plan. Rather than change the EU treaty, they could instead modify the separate statute of the euro zone’s bail-out fund, the European Stability Mechanism. To begin with, it could be merged with the proposed bank-resolution authority. The French would get more of an intergovernmental system in which they wield more influence on economic policy while excluding the pesky commission. The Germans would keep a veto on money matters. And the British, who are not members of the fund, would be hung out to dry. A clever scheme, perhaps, but not one that is likely to pass the test of the markets. So it’s back to the Three Rs: Reform, reform, reform.

Economist.com/blogs/charlemagne