"Drawn up by the top European Union officials — the European Council president, Herman Van Rompuy; the European Commission president, José Manuel Barroso; the European Central Bank president, Mario Draghi; and the head of the Eurogroup of finance ministers, Jean-Claude Juncker — the plan has weight, and it seems to reflect a new willingness in Europe to isolate Berlin and compel it to accept changes it has steadfastly resisted."
"The 10-year “road map” was drafted after months of discussions with the 27 member countries, especially with the 17 that use the euro. It calls for immediate steps “towards a genuine economic and monetary union,” and is meant to provide the agenda for the European Union summit meeting on Thursday and Friday in Brussels. It is also intended to give the financial markets confidence that the European Union will stand behind its members and its common currency — a harder task, given that much of the plan would take many months to negotiate and ratify."
Ok, we can't quite break out the bubbly yet-we're still a looong way from that. Indeed Merkel still has some reservations you might say:
"Although watered down from an earlier draft to try to appease Berlin, the proposals brought immediate criticism from Germany, with Chancellor Angela Merkel telling her partners in her governing coalition, the neo-liberal Free Democrats, that Europe would not have total sharing of debt “as long as I live."
To actually start talking about her personal mortality, to say "over my dead body" that shows the Germans still have just a few reservations. Still it's significant that such things are actually being proposed. There's no longer any doubt that the rest of the EU is moving away from Germany.
Indeed, this is why an editorial in today's NY Times suggested Germany leave the euro so as to save it!
"A better, bolder and, until now, almost inconceivable solution is for Germany to reintroduce the mark, which would cause the euro to immediately decline in value. Such a devaluation would give troubled economies, especially those of Greece, Italy and Spain, the financial flexibility they need to stabilize themselves."
"Although repeated currency devaluations are not the path to prosperity, a weaker euro would give a boost in competitiveness to all members of the monetary union, including France and the Netherlands, which is why they might very well choose to remain in it even if Germany were to gradually leave. A resurgence of manufacturing would also allow the vast unemployment rolls of Spain, Portugal, Greece and other countries to begin to decline. The tremendous loss of human capital and human dignity we are witnessing would ease."
Give the writers credit at least for originality-usually the argument is that Greece should leave.
"While most observers, including German policy makers, believe Germany will do what is necessary to save the euro, it is more important to save the European Union, which is older, larger and more significant than the euro zone. Continuing on the current trajectory will most likely entail more bailouts, more guarantees and ultimately dramatic sovereign defaults or enormous fiscal transfers. That would mean a continued loss of human capital and dignity for southern Europe and a nightmare of an open-ended commitment of trillions of euros on the part of Germany."
What is out of the question is that Germany is losing control of the narrative in Europe:
"Still, it ratchets up the pressure further on Ms. Merkel. On Friday, the three leaders of the next-largest economies in the euro zone — François Hollande of France, Mario Monti of Italy and Mariano Rajoy of Spain — pressed her hard to agree to collective debt and European-wide banking supervision and deposit insurance to ease market pressure on Spain and Italy. She was also pressed to change the rules to allow bailout funds to operate like banks and purchase the sovereign debt of Italy and Spain without conditions."
"Her answer then was blunt: that solidarity was possible only with serious controls and collective oversight, and that “we have existing treaties and they must be respected.” Pooling of debt could come only with pooling of sovereignty and responsibility, she said."
"On Monday, Ms. Merkel was even sterner, dismissing “euro bonds, euro bills and European deposit insurance with joint liability and much more” as “economically wrong and counterproductive,” besides violating German law."
“It’s not a bold prediction to say that in Brussels most eyes — all eyes — will be on Germany yet again,” said Ms. Merkel, who is known for saying what she thinks. “I say quite openly: When I think of the summit on Thursday, I’m concerned that once again the discussion will be far too much about all kinds of ideas for joint liability and far too little about improved oversight and structural measures.”
"Germany may be fighting a losing battle, given how quickly the markets could turn on Italy and even France. Ms. Merkel, who seems so strong when seen from abroad, has been weakened in recent months, struggling to get her Parliament to vote by the necessary three-fifths majority to approve a permanent bailout fund, known as the European Stability Mechanism, even when it is packaged with a fiscal discipline treaty she has pushed. That vote is expected to come on Friday night, when she returns from Brussels, so she must be seen, especially by the Free Democrats, to put up a strong defense of Germany’s position."
Just yesterday I was talking about how this would be the moment for Keynes-he would know what to do. Hopefully something like what happened in his negotiation with the US Treasury in the 1944 Bretton Woods agreement happens soon. Then the US and Britian had quite dismilar interests and yet were able to put together a international monetary system that even now on balance is probably the most successful in economic history yet.
For why I say it's the most successful please click below
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