Euro stability
October 29, 2010
Chancellor Merkel pushed the right issues, but at this summit, at least, made little concrete progress. It remains to be seen whether the December summit will in fact bring about the desired effect.
The reason for this lies not least in her advance talks with French President Nicolas Sarkozy. Through the “Deauville Deal” shortly before the summit, Merkel managed to irritate almost everyone in the EU. Those who had supported automatic sanctions for budget sinners noted with horror that the German chancellor had given up on this central goal.
Merkel also managed to stab the European Commission in the back. The Commission had pursued this aim and, until the Deauville conference, could be sure having the support of the Germans.
In the end, even European Council President Herman Van Rompuy must have felt blindsided. He was given the task of working out the details of the reforms, and even before he could present his results officially, Germany and France declared they'd already reached a decision.
As a trade-off, Merkel had secured assurances from Sarkozy that France would echo the German demands for altering the Lisbon Treaty. Merkel experienced how little that promise was worth when she got to the summit. Rarely has such a wall of resistance built up, above all on the question of taking away voting rights. This means that early on Merkel threw away one of the most important methods of stabilizing the euro, and has - at least so far - has nothing to show for her trade-off.
Whether the EU can agree on a so-called small amendment to the treaty by December, is not only down to France. As far as taking away voting rights is concerned, Merkel can forget it. Now she just says she wants to keep the item “on the agenda”. It won't go beyond that.
It's a different story when it comes to the permanent rescue mechanism for financially stricken states. The participation of the private sectors is popular. And the fear in the whole eurozone of the collapse of a member state could give the necessary pressure to get through moderate treaty amendments on this issue.
The strange thing is this: Had Merkel fought for automatic sanctions at the summit, and looked for allies on the issue, she may have saved herself and the whole EU some of the conflict over treaty changes. Because the stricter the disciplinary tools are before a financial crisis, the more unlikely it is, that the whole mechanism will need to be used at all.
Author: Christoph Hasselbach (jli)
Editor: Chuck Penfold