The meeting of EU heads of government in Brussels on 9 December was the latest in the series of "critical events" shaping the future of the union. The same fateful aura has surrounded every summit during the past year. This time, though, it is possible that truly crucial decisions were taken that will start off an irreversible chain-reaction with no defined endpoint. In any case, there are bound to be consequences as groups form around the common currency – insiders, outsiders and prospective insiders – and become institutionalized and linked to political power in an entirely new way.

For several days after the meeting, the media were overflowing with comment and opinion. Two issues dominated: how will the markets respond, and which member countries emerged as winners and losers? Ever since the Greek debt crisis hit the headlines, the same questions have been hammered home, month after month, week after week. They have come to conceal not only the political processes leading to course-altering decisions, but also say something essential about a grave loss of meaning. What has happened to the citizens, to the democratic idea and the fundamental principles of popular rule in current discussions about Europe? Writing recently in Die Zeit, Thomas Assheuer asked, in an accusatory tone, where all the intellectuals were when the European project collapsed. Eurozine has published an entire series of articles and conversations on the euro crisis that, more or less explicitly, ask the same question. Clearly, far too many Europeans have avoided the "the question of Europe". They hide behind their comfortable mumbled exchanges. They have avoided investigating the real political conflicts. They have gone with the flow. They have dodged taking a stand in difficult political debates. The intellectual toolkit required for orientation seems to have got lost. When things that matter are suddenly at risk – democracy, politics, security – waking up to that chilly world triggers a sense of general incomprehension.

When I read the novels of W.G. Sebald for the first time, some ten years ago, the pessimism then, in the wake of 9/11, was as deep as it is now. They exerted an hypnotic effect. It was like tumbling headlong into European memories of human helplessness and political violence: the Holocaust, the insistence on borders, the streams of refugees, the disorientation. Sebald transforms history from a time-line that allows us to leave catastrophes behind into a building where they still exist in different spaces; where, in some sense, they are still happening, so that the survivors and their descendants are condemned to wander from one to another. Sebald's novels remind us of the crucial element of every affirmation of the European idea: fear of Europe. As I read, the effect was like a depth charge with delayed release. It contributed to my feeling that, for the first time, my arguments for a federal Europe would have to be formulated more precisely.

In the middle of the political upheavals, I was by chance pulled back into the literary world of Sebald. Now, as I read Austerlitz, his last novel, that feeling returns. But this time it is because I also note how the ruling elites of the continent – the heads of governments, technocrats and commissioners – seem to have forgotten the constitutional fear of post-war Europe. They are no longer in touch with what has been called "the European experience" – with Sebald's world.

But the extent of their loss seems to be greater still. When the Arab Spring erupted, European leaders shied away for as long as possible from demanding that the old tyrants retire. It was not hard to decode their message: rather undemocratic stability than insecure democracy. The intervention in Libya was a relief. But the distrust had already grown roots. European politicians seemed to have lost their democratic reflexes. Might this not be seen as a sign that in a conceivable European emergency – perhaps when the consensus about the euro cracks and the union is shaken to pieces – stability would be also prioritized over democracy?

Smuggled out from an Italian prison island in the Mediterranean, Altiero Spinelli's fabled manifesto for a federal Europe circulated among democrats and veterans of the resistance during the final stages of WW2. Many had drawn the conclusion that only a united Europe could conquer nationalism and offer protection against new tyrants, which at that time above all meant the rulers in Moscow.

A few years later, the Cold War now underway, the Swedish liberal Herbert Tingsten wrote the following about the experience of the disintegration during the inter-war years: "We may be of the Right, or Liberals or Socialists: we will not tolerate the chaos which a few decades ago was described as 'economic freedom'. In a democratic state, the people must not live in misery and unemployment." At the time, Tingsten was the towering figure in Sweden's intellectual life. As the editor-in-chief of Dagens Nyheter, the most widely circulated broadsheet in the country, he dominated the debate with his cultural radicalism and uncompromising anti-communism. Pessimism and failing political will during the inter-war years had, he argued, "rendered the world desolate for the people".

In Austerlitz, Sebald meditates over and over again on three kinds of buildings: the railway station, the library and the fortress turned prison camp. They come to represent the historical corner stones of modern Europe, embodying the dream of travel, the need to properly order memory and the recurring desire to lock people up.

These texts – by Spinelli, Tingsten and Sebald – span the movement that successively united Europe, a movement driven by the ambition to control capitalism, nationalism and, above all, Germany. What came to be seen as the European experience is the negative pole: never to be forgotten, we must distance ourselves from it and invent another Europe. There is reason for us to remind ourselves of these things, once so self-evident. The conclusions of Spinelli, Tingsten and Sebald stand in stark contrast to the comments that have dominated media and politics in recent months. Reading them is like waking up after a long period of deep sleep.

During the euro crisis, a small circle of government leaders together with technocrats from the European Central Bank (ECB) have grabbed for themselves the right to take far-reaching decisions. In memos from civil servants in the Commission they have even been collectively referred to as "the Frankfurt group". The past six months have seen weekly declarations to the effect that the EU is ruled by the wealthy nations and that indebted states must accept tutelage. Shameless moves have been made to capture power from the Commission in Brussels and transfer it to the assertive Berlin-Paris axis.

The summit meeting on 9 December reinforced this pattern and attempted to provide it with more formal legitimacy. EU heads of government are now to meet more often and will eventually form the political nexus of the Union. Power shifts inexorably towards a circle of people who will discuss all issues and finalize all decisions behind closed doors. In their hands, politics will change into diplomacy, public debate into cunning power games and the European idea into negotiations between states.

In this situation, the polemical essay by Jürgen Habermas on constitutional jurisprudence, Zur Verfassung Europas, has become a welcome "call to arms" in defence of the EU's progress in the direction of civilization and democracy. Recent developments have arguably added edge to his warning that, in the shadow cast by the crisis, the Union risks being transformed into a "post-democratic regime of bureaucrats". In fact, the Commission (intended as the forum for small member nations) and the Parliament (the forum for the citizens) are crowded out from crucial decision-making. The movement initiated by the Lisbon treaty, which despite its many shortcomings provided an impetus towards a uniquely transnational democracy, is now seriously threatened.

According to Habermas, the fact that an elite is closing ranks around the EU, seeing it as a private, elitist project, is "insolent". The outcome of this insolence is that the citizenry is once more attracted to the illusion of nationhood, complete with the historically only-too-familiar package of border patrols, anti-European rhetoric and xenophobia. If you perceive the world as "rendered desolate for the people", all this will add up to a popular step backwards, reassuring and rational.

During the debt crisis, democracy has become the forgotten factor on the national as well as the EU level. Both Italy and Greece have acquired heads of government who are "apolitical" technocrats. This fact may mark a transition to political systems that are less corrupt and "client-oriented", but in difficult political situations, technocracies must be regarded with considerable scepticism. Even though in both countries the governments are scrutinized by parliaments elected by popular vote, the arrival of technocrats indicates (especially in Italy, where the entire cabinet is a collection of experts) that democracy has edged closer to the point where it might be eliminated or seriously curtailed by an administrative emergency decision.

Actually, there should be no need even to worry. Similar transitional governments are, after all, not unusual. However, the pressure to calm "the market" is now so intense that departures from democratic rules may well be accepted in an acute crisis situation. Other heads of government will look away, as will that powerful grey eminence, the ECB, and perhaps the anxious, stressed public as well. Successful actions by a government of experts might tempt postponements of scheduled parliamentary elections for the sake of stability. Failures could cause total political disasters, driven by "the markets", causing the citizenry to lose trust both in appointed technocrats and in duly elected politicians, warns José Ignacio Torreblanca. The continent, he continues, is in state of a democratic crisis that is damaging in two respects: "While democracy (as the capacity to self-govern) evaporates on a national level, it does not reappear anywhere else, least of all where it ought to – in Europe. On the contrary: instead of reinforcing democracy in Europe, the crisis is bolstering technocracy on two levels: on the national level [...] and on the European level."

In his book, Ill Fares the Land, Tony Judt predicted that neoliberal agitation for a "minimal state" would cease after the crash in 2008 and be replaced by the return of the state and a battle about its characteristics: should it be democratic or authoritarian, kindly or malevolent, based on surveillance or trust? He turned out to be right. That battle is being fought already.

The longstanding, wishful call for "more Europe" has been converted into a meaningless platitude. Sharper, more focused opinions are now necessary: the parliament must be the engine of politics, the Commission must submit to the will of the parliament, social responsibility and a redistributive policy from wealthy to poor regions must become a reality – otherwise there is no future either for the euro or the European idea.

For the first time, this can be said without risking being regarded as a stranded dreamer. The Parliament has backed some form of fiscal rights and the Commission favours a Tobin tax on financial transactions. Anyone who can bear reading through Barroso's speeches and written utterances will discover that, post-2008, neoliberal keywords have been cautiously replaced by the vocabulary of social concern. The IMF states that growing inequality is a causative factor in the crisis. If the different party groupings decide, as some have actually discussed, to nominate their own candidates for the presidency of the Commission in the next European elections, the result will be a democratic landslide in favour of federation.

The situation is contradictory, both ominous and hopeful. Europe once again finds itself at a critical junction: it can decide either on a "post-democratic regime of bureaucrats" or else on a transnational democracy, reinvented but in the federalist spirit. The EU has long been moving towards such a democratic solution; now, for the first time, it is within reach. However, as Jürgen Habermas has written, it requires that the heads of government in the European Council are willing to go for "something that is contrary to their own interest, i.e. holding on to power". This is more or less the same conclusion as that drawn a few years ago by the political scientist Simon Hix, who in his book What's Wrong with the European Union and How to Fix It argues the Lisbon treaty has greater potential than we believe.

Joschka Fischer is of course right when he points out that it is unrealistic to look for a new and better treaty. His fears that Europe might become re-nationalized are confirmed when one observes the successful attempts by the heads of government to strengthen their positions of power in the European Council. But Fischer's radical pessimism seems to overwhelm him to the point of inaction. Perhaps his desire for a political Big Bang, as well as a tailor-made federal constitution, blinds him to the opportunities that might still be available. To identify these minor opportunities and expand them later: isn't that how federalists have always worked? Continued democratization and politicization are possible if elected politicians demonstrate a will to act. But this is not going to happen without a process of opinion-formation and with intellectuals and politicians taking a clear public stance.

For a long time, political scientists and economists have argued that the euro will cause either fragmentation or federalism, since monetary union is impossible without fiscal coordination. A cautious interpretation based on the recent European summit meetings, and the latest one in particular, suggests that the profound crisis of the euro could, in the best case, deliver the push towards integration that many have predicted. The euro mechanism would then lead to Europe reversing into a stronger political union, albeit at an appallingly high social cost. The subdivision into A-, B- and C-teams currently being mooted could be the first step in a slowly unfolding logical progression, in which countries outside the eurozone are squeezed ever further onto the periphery, and finally out of the EU itself. But a stronger political union, with a common policy on control and stabilization and with the euro as the adhesive, would force the member states to choose whether to stay or go: no euro, no EU membership. If this is so, the decisions currently being made are leading not to division and fragmentation but are moves towards a much more complex integration process. However this cannot not take place unless the issues of popular rule, citizenship and democracy are brought centre stage. What, then, would be the character of this European super-state, in many ways such a strange concept? That question awaits our answers – our taking sides.

Any investigation of Europe, wherever you start and whichever direction you take at first, ends up in Germany. So it is interesting that the "German question" is now returning to the political debate, albeit formulated in new ways. Joschka Fischer has said that Germany, conscious of its historical role, has until now driven the realization of the European idea, but he is concerned that Germany may now have lost interest. However, the new "German question" has surely begun to change shape. Germany, aware of the strength that Fischer fears, has insisted on the submission of other nations and on continued integration according to conditions set from Berlin. What is about to change is the unwritten contract between Germany and the rest of the continent on the subject of the European idea.

In his Zürich lectures on Luftkrieg und Literatur [English title: On the Natural History of Destruction], W. G. Sebald drew attention to the British carpet bombing of Nazi Germany and the fire storms in Hamburg. An eye-witness describes how a woman trying to escape from the burning city carried the charred remains of her dead infant in her suitcase until, on a strange railway platform, the lock broke and the contents fell out. Sebald's strong empathy with the Germans provokes emotions that expose the continued charge carried by European history. I am aware of it as a gut feeling. Usually hidden, but when the lock suddenly bursts, the reactions are immediate.

For many years now, the glass civil service tower in Brussels has been the target of vague European unease. In a sense, this unease has focused on a blank space, a faceless, impersonal symbol. However, as the protests begin to shift in the direction of where the decisions are actually being made, towards Berlin, other, more unpleasant ghosts have emerged from history. Does this demonstrate that the public interprets current developments in terms of the replacement of the European idea by another geopolitical power structure? Is Germany once again the European problem?

I believe that, for once, Jürgen Habermas is misjudging the matter when he argues that the link between the European project and the concept of peaceful coexistence is no longer relevant. The national, chauvinistic and separatist passions sweeping through Hungary, northern Italy, Denmark and other countries indicate the opposite. The European experience has not been conquered. The demons that the European project succeeded in defeating still wait to take revenge. Fear of Europe has become no less valid.

Recently, I saw a new production of Oresteia by Aeschylus, a trilogy of plays about how Athens progressed from blood vendettas and spiralling violence to social order based on law. In a strange way, it seemed to correspond directly to the European drama now unfolding in the streets of Athens and at the summit meetings in Brussels, and reflected in the morning papers arriving on my doorstep. At a transnational level, the process of the European Union's astonishing advance has been similar. But this advance cannot reach its conclusion without the Union's decision-making system becoming more democratic and more transparent. Procrastination is no longer an option.

Translated by Anna Paterson

This article was originally published by Eurozine.