Clutching at Straws

Euro leaders must embrace real fiscal union before it's too late
By Mark Russell,  Newser Staff
Posted Dec 5, 2011 3:55 AM CST
Clutching at Straws
German Chancellor Angela Merkel and French President Nicolas Sarkozy say good bye after their meeting in Strasbourg, France, last month.   (AP Photo/Michael Probst)

(Newser) – With the survival of the eurozone at stake, European leaders are aiming to complete a plan this week that will transform the region and save the euro, reports the New York Times. Despite major differences that remain between Angela Merkel and Nicolas Sarkozy, a four-point deal is taking shape, including increased fiscal discipline for eurozone countries to be added to European treaties; an increase of the European Financial Stability Facility to two or three times its current size; more money to the IMF to increase the bailout fund; and relaxing regulations to enable the European Central Bank in the short run to continue aggressively supporting Italian and Spanish bonds.

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It's a huge and ambitious plan—and completely irrelevant to the eurozone's problems, says Alex Harrowell at A Fistful of Euros, noting that two of the biggest violators of the eurozone's fiscal rules for the past decade were Germany and France. With Germany obsessing about austerity and French concerned with sovereignty, "I doubt they have ever understood the economic and financial dynamics behind the crisis," writes Wolfgang Munchau in the Financial Times. Propping up the ECB in the short run and moving toward eurobonds in the long run—along with a true fiscal union—is the only hope of saving the euro. "What I fear is a fudge," says Munchau, calling temporary liquidity without bigger changes "a compromise, but no solution." (Read more Europe stories.)

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