At their preparatory meeting, German chancellor Merkel and French president Sarkozy just announced their common position for this week’s EU summit. No written statement was issued but during a press conference, the Eurozone’s leading political couple, also known as Merkozy pushed for far-reaching Treaty changes.
The main elements of the German-French plan to save the monetary union are automatic sanctions for deficit violators, an earlier start of the European Stability Mechanism (a kind of European IMF, the Eurozone’s permanent crisis resolution mechanism), a balanced-budget rule implemented in all national constitutions and monthly Eurozone meetings at the heads of state level. The European Constitutional Court should investigate whether national balanced-budget rules can be implemented. More generally, sanctions should – if needed – be enforced by the European Court. In addition, a single European country should not be able to block decisions on bail-outs under the framework of the ESM. On regards the issue of Eurobonds, Merkel and Sarkozy reiterated the well known “no”.
The new rules of the game should be applied to all European countries. However, as Merkel said, if need be, the Eurozone countries should go along alone, irrespective of non-Eurozone countries.
At first glance, today’s plans should give the Eurozone a clear headstart in maybe the final week of truth. Now, the big challenge will be to put everything on paper and to convince the European partners. Not an easy one but if Merkozy really want to deliver a ‘fiscal compact’ on Friday, they will have to put their money where their mouth is.