After months of uncertainty, in which the great economies of Europe appeared to be close to collapse because of bad debt, Germany and France now seem close to sealing a deal that would have the stronger economies of Europe manage the budgets of everybody else to restore investor confidence.
If journalists, by necessity, have become good at writing stories about war, terrorism, and obscure religious militant groups since 9/11, then today’s generation of journalists are likely to become good at telling the story about financial distress and recovery. Because the financial distress affects everyone, and it may take years before global markets find their footing and become stable, boring, and uninteresting. In the meantime, the markets are confusing, and that’s why journalists get paid "the big bucks" to explore and explain them.
Stock market investors will almost inevitably like this proposed European deal, which will centralize the decisionmaking over budget matters, and we can look for stock markets to improve throughout the coming days. But there are many Europeans who worry about handing over their sovereignty and their most important government functions to a pair of powerful neighbors, France and Germany, both of whom have attempted in the past to take over control of Europe by military force.
In making the case for the new plan, French President Nicholas Sarkozy admitted that there is a “fear that France could lose control of its own destiny,” but the conservative leader added that for the good of a unified European economy, "France and Germany have decided to unite their fate." The German magazine Der Spiegel was sensitive to the historical resonance of all this, and why there may be objections to uniting all Europe’s economic decisions under a “German model.”
In these days of crisis in Europe, the "German model" has become something of a magic formula. Like it or not, the dusty, dry Germans now seem to hold the key to European salvation.
Laura Raim, in the conservative Paris newspaper Le Figaro, writes that if smaller, weaker countries suddenly find themselves being told what to do by their big German brother, they have only their own spendthrift ways to blame.
Most critics do actually recognize that the German “domination” may actually be involuntary. Effectively, it isn’t Germany’s fault if its economy, which is more solid than the economies of its neighbors, allows it to better resist the attacks of the financial market.
Kim Willsher, the Guardian’s writer in Paris, wrote:
Sarkozy and Merkel tiptoed around each other, talking of "amitié" and "entente" and "alliance" and "a dynamic, living relationship".
But the French president just came right out with it: there had been "70 years of bloody conflict, followed by 70 years of peace", he said.Germany and France "had to understand each other".
Fair enough, but will any of this restructuring actually work? The US Treasury Secretary may think so, but he has a vested interest in saying he believes in the plan, because the US economy depends on a European recovery. The Economist, in last week’s issue, seemed skeptical of a German-led grand plan, but it added that fiscal discipline was needed, and that the most fiscally disciplined country on the continent should lead the rescue effort.
Europe needs an all-encompassing deal to save itself. The crisis is now about the survival of the euro, so it requires a big response; nobody will be spared if the euro collapses. A sensible compromise would be to impose greater discipline now, in exchange for the eventual introduction of conditional Eurobonds. A paper by the Brussels-based think-tank Bruegel adds the need for a euro-zone finance ministry, with power to raise its own taxes and to oversee the banking system.
With so much invested in a common European currency, there seems to be no way out of it. The only solution appears to be going deeper and deeper into a European Union, as scary as that sounds.