The vision that Yeats sketched out, painful, pessimistic and atavistic, was of a world where older demons come back to haunt us. It is a vision that seems suddenly and unexpectedly to have returned to western Europe, and it is sharply at odds with the familiar optimism that Jacques Delors, the President of the European Commission, was expressing in London even last week. 'In a world that is moving again, however chaotically, there is the prospect of a climate of hope that was virtually inconceivable in the Cold War era,' he said.

The turmoil in financial markets is only the most visible indication of a huge seismic shock that is rattling every window in the common European house. In Italy, the government has asked for emergency economic powers. In Sweden, interest rates hit 75 per cent. In Britain, the Bank of England and the Treasury pulled up every big gun they had to defend the pound. Europe's political economy is under siege.

Yeats was writing at a time when the world was entering a period of turmoil. The First World War was followed by the Thirty Years crisis described by E H Carr, when the forces of nationalism and economic instability shook the world system until it fell to pieces. It was not lost on many of Europe's post-war architects that it had been economic fragmentation that undid the continent, leading to the sauve qui peut policies of the Thirties.

Since the Second World War, the creation of a network of organisations in Europe, crossing the old borders, has been intended to ensure a centre that could hold. With the lessons of two world wars behind them, the aim for those who created this web was political integration, making war impossible, unthinkable. The method was economic integration, bringing the states of western Europe into trading relationships that would build social ties.

'The founding fathers of Europe had the wisdom to set our countries on a path of solidarity and co-operation which would seem to make any return to the old demons impossible,' said Mr Delors. Starting with the European Coal and Steel Community, moving on to the Common Agricultural Policy and the European Economic Community, economic integration was to be a key component of a more peaceful Europe, an ally in the construction of a European centre that could hold.

IN THE past 15 years, economic integration has received a huge injection of energy. In Europe, the Single Market; across the world, a frenzied burst of deregulation, privatisation and the emergence of global markets for some products. 'There is no longer any national sovereignty in economic affairs,' said Martin Bangemann, EC commissioner for industrial affairs, last week. The result has been the growth of interdependence among states.

The European Monetary System was established in 1979 to help to manage interdependence. It is not just a a technical device for providing currency stability. It is also for ensuring greater political unity among the states of western Europe. To maintain currency stability everybody must march in step.

The system ensures that economic policies converge, and countries that break ranks pay a price. The aim the EC set itself at the Maastricht summit was to crown this with monetary union, a single currency by the end of the century. What more powerful symbol of Europe's new unity? What more potent mechanism for welding nations and peoples even closer together?

Yet Europe's monetary stability is now at the centre of the whirlwind. For two countries in particular, the prospect of a single currency looked very distant. Italy has been under siege for months; Britain is only just behind. John Major may claim that he is determined to fight inflation until he is blue in the face, but a sterling devaluation still looks like a good bet to the markets.

Both countries are latecomers to the common path, and the costs of convincing the markets that they are serious are high. Britain has only been a member of the exchange rate mechanism of the EMS for two years; markets do not trust the protestations that we are now totally committed to low inflation, no devaluation and fiscal stability. The pound's baptism of fire is one thing; for Italy, it is more of a deathbed confession. The government there has got too much to do, and not enough time. Behind these are more latecomers to the party, the EC's new applicants, two of which - Sweden and Finland - suffered badly at the hands of the financial markets.

The crisis in the EMS has a sound economic explanation. At the root of it is Germany, which provides the motor for the system. Germany is sucking in money to pay for the reconstruction of its eastern states. Low inflation is a totem to the Germans, viewed as the bulwark against chaos, but the Bundesbank's insistence on tough monetary policy is causing grief everywhere else. Other European countries are having to sustain high interest rates to compete, but capital is still flowing into Frankfurt and the mark. It is, admittedly, not only in Europe that currencies are under assault. The weakness of the US economy and dollar, and the large gap between low US and high German interest rates, has undermined everyone.

BUT the economic equation is only half the answer. Just as the EMS is a creation of those who wanted to advance Europe's unity, so its current problems are fundamentally political, to do with fears that unity may be unravelling. Denmark has rejected Maastricht; France votes on the treaty a week today; there are calls from the right of the Conservative Party and the Labour left for Britain to do the same; even in Germany doubts are growing. The slowdown of the European economy only adds to uncertainties.

If France rejects Maastricht, that will be the death of the treaty, and of the version of union which it contains. It will also rock the EMS to its roots. 'Non-ratification of Maastricht would make it impossible to maintain the European Monetary System,' said one banker last week.

Maastricht is under fire from all sides. The right in every country rejects it. The target of the French 'no' campaign is what they call technocracy, the denial of citizenship that the EC's distant bureaucratic structures seem to represent. But the consequences of bringing down borders are also the target: the rise of immigration, fears of crime spreading across frontiers, of the loss of the control that nation-states painstakingly assembled over centuries. In a world of rising crime it seems mad to many to be dismantling the garden fence.

From the left, too, criticism is rising, not only of Maastricht but of the 'European Redundancy Machine'. Bryan Gould, dissenting from the Labour leadership line, has said that high exchange rates are 'throttling' industry. 'It is in these circumstances that we are invited to make the strait- jacket permanent and to place it beyond political debate or action by signing up for the Maastricht Treaty,' he said. 'It almost beggars belief.'

David Blunkett, the shadow health secretary, warned yesterday that recession, rising unemployment and cuts in public services were creating a 'tinderbox'. He said: 'The danger of Maastricht, in its present form, is that it may reinforce genuine worries that influence and control are slipping away from ordinary people.' These are messages that would be understood by Denmark's Social Democrats, like the Labour Party a late convert to the European cause. Caught in the middle are the centre parties that defend Maastricht. The reaction - in France, Germany, Sweden and Finland - is to convene the forces of the leftish-right and rightish-left in some grand coalition. It is difficult: harnessing the Socialists in France to the neo- Gaullists has been painful. In Britain, with left-right tensions entrenched by a decade of Margaret Thatcher, there is precious little central ground to colonise.

But if the Maastricht train is brought to a halt, what happens next? Germany would almost certainly stick to the same economic policies. Any realignment in the EMS would almost certainly make its currency stronger. France is not about to drop its strong franc; nor will Europe's other countries suddenly ditch their policies of the last 10 years.

Though it might appear to outsiders that the policies of Germany are what has caused the problem, for those economies tied to Germany the EMS has been successful. The system affords at least some refuge from the wild winds outside. A decade of virtue, with tough monetary policy, cuts in public spending and a strong currency mean that France may still end 1992 with respectable growth of 2 per cent. Assuming that the French follow the German mark - the Dutch and Belgian currencies would almost certainly go with them - there is a serious danger that the currencies left behind - Britain, Italy, Spain, Portugal, Ireland - would become a permanent second tier, Europe's low achievers.

Something similar may happen over political union. French politicians know that the one thing that must not be allowed to become a casualty of the crisis is the Franco-German relationship. German politicians are already talking about a form of political union that will embrace the core countries of western Europe. The result could equally be a two-tier Europe, one possibly not built through Brussels and the EC, but on tighter bilateral relations between Bonn and Paris, with the smaller countries of the north- west tacked on. It might be a union in which it was profoundly difficult for Britain to make its voice heard.

The British conceit is that if the EC weakens, the dream of a strictly economic union, without the political fripperies, can be realised. But the reaction against Maastricht is not only against political centralisation: it is also against the pace and the effects of economic integration over the past decade.

The EC is 'a preparation for a global economic structure - and we are far ahead of our partners and competitors', said Mr Bangemann last week. But the lesson of recent months is that the EC may also be ahead of its citizens. As well as being a stimulus to investment and industries, 'the rapid globalisation of the economy is also a source of anxiety to peoples keen to strengthen their sense of belonging to communities with which they identify,' Mr Delors pointed out. 'Integration is often presented as a kind of techno- economic tidal wave, which is sweeping governments and peoples before it,' said David Henderson, a former official of the Organisation for Economic Co- operation and Development at last week's conference in London. 'How far and how fast international economic integration proceeds will largely depend on what governments and public opinion wish to happen or are prepared to accept. This is not predetermined.' The lesson is only starting to sink in in Brussels, but Mr Major has already digested it. It is why his Government is at pains to keep ranks over Maastricht.

Interdependence can be beneficial to all parties: a positive-sum game, in the language of economists. But when the wind blows cold it looks more like a zero-sum game, where one group's gains are at the cost of the others.

Britain might want the EC to be only a free-trade area; but that is not what the rest of the continent wants. Indeed, the wind is blowing against freer trade. The EC is supposed to be a bulwark against those older forces, a sea- wall against storms. If it does not fulfil that function, western Europe will find something else that does. The centre may hold: but Britain may not be there.