Another year has passed with European leaders holding one crisis summit after another but there is still no sign that the debt crisis in Europe is anywhere close to be resolved. Although the year began well for euro with Estonia joining the eurozone, the former Soviet republic was the 17th EU nation to adopt the European single currency. \"It is a strong signal of the attraction and stability that the euro brings to member states of the European Union,\" boasted European Commission President Jose Manuel Barroso. But the year 2011 is ending with the euro dropping to its lowest level against the US dollar in 11 months raising serious concerns about the future of the single currency. EU leaders declared a number of proposals, initiatives and austerity programmes to contain the crisis but it was the rating agencies which determined the ups and downs on the financial markets . In March, EU leaders approved the temporary 500 billion euro bailout fund, the European Financial Stability Facility (EFSF), which is expected to be replaced by the permanent European Stability Mechanism (ESM) by July 2012. The debt crisis had its political casualties with the fall of the prime ministers in Greece, George Papandreou, and in Italy, Silvio Berlusconi, and change of the government in Spain. Although leaders of the 17-member Eurozone agreed to give Greece another bailout of 100 billion euro and write off 50 percent of its debts held by private banks, the fear of a Greek default persists and the threat of contagion to other EU countries remains real. Early December, US ratings agency Standard and Poor\'s warned nearly all eurozone countries with a downgrade and negative prognoses. The European press reflected the pessimistic mood with headlines like \"panic in the eurozone\" and \"euro, a currency living on borrowed time.\" In December, EU leaders agreed on a fiscal compact to move towards more economic integration and budget discipline, but the UK rejected the deal raising sspeculation over the creation of a two-tier Europe. Analysts are warning that things are likely to turn for the worse for the eurozone in 2012 and the euro crisis could plunge the world into recession. It is also not clear if the eurozone will survive. On the external front, the EU faced immense security, political and strategic challenges with the outbreak of the \"Arab Spring.\" The European policy was totally focussed on supporting the regimes in North Africa and the sudden change of events caught Europe totally unawares and unprepared to deal with the situation. In December, the EU released a lengthy report on its response to the \"Arab Spring.\" It noted that since the first demonstrations in Tunisia in December 2010, a wave of popular discontent has shaken the Arab world, with people calling for dignity, democracy, and social justice. Despite the unexpected magnitude of these uprisings, the EU has been quick to recognise the challenges of the political and economic transition faced by the region as a whole, it said. The document said the EU has also recognised the need to adopt a new approach to relations with its southern neighbours. EU support focuses on the \"3 Ms\": Money, Mobility and Markets. However, with the debt crisis to continue in 2012, the EU\'s foreign policy is not expected to be particularly strong and influential in shaping world events. On Syria, the EU has called on President Bashar al-Asad to step down and allow regime change. EU relations with Iran fell to its lowest ebb with Brussels expanding its sanctions against the Islamic Republic over its controversial nuclear programme. In January, the EU will decide whether to ban oil imports from Iran to Europe. The 21st session of the Joint Council for the European Union-Gulf Cooperation Council (EU-GCC), was held in Abu Dhabi in April. The Council expressed the view that further strengthening of EU-GCC relations would be an effective and valuable contribution to regional security and stability. The EU and the GCC reaffirmed their shared position that a just, comprehensive and lasting peace in the Middle East is vital for international peace and security and expressed their continued support for the Arab Peace Initiative to resolve the Palestine question.