Mario Monti, Italy’s PM (left), Mario Draghi, President of the ECB (center), and Angela Merkel, Germany’s Chancellor (right), during the EU summit of June 2012. (Flickr)
It’s a surprise, a big surprise!
The latest European Council of Brussels finally reached an agreement, snatched from Germany, while a failure (or a semi-failure) was expected.
Spain and Italy, who are given a rough ride by the crisis, obtained several guarantees regarding their respective financial situation and a direct recapitalization of their banks without going through the future European Mechanism Stability, despite the fact that Angela Merkel considered budgetary integration as a condition of any financial solidarity between Member States, especially within the euro area.
The European Council opened the way to a banking union in which the outlines must be detailed and refined by Herman Van Rompuy and the European Commission. Nonetheless, it is a genuine surprise insofar as no precursor announced such an outcome, as Germany maintained its positions, as Jean Quatremer, the correspondent of Libération in Brussels, reminded it.
The German point of view, intransigent and inflexible, was despairing and exasperating its partners, worried about their national economies and the future of the euro area. For the German head of Government, the necessary progress towards federalism was not feasible without implementing a strong discipline between Member-States, in other words, all-out austerity.
This policy was questioned by Italy and Spain and also by France even if there was also a political stake for François Hollande. For the new French President the issue was simple: showing that he could extend a pressure on Angela Merkel’s position and also that he had enough authority to impose his own views, after having declared during the election campaign that he would ratify the harshly negotiated fiscal compact only if a section on growth with clear propositions and commitments was included. The implementation of the growth compact (that foresees the spending of 120 millions euros to stimulate growth), conceded by Germany, is very important politically, insofar as François Hollande can proudly say he forced Angela Merkel to change her position. This explained his relative satisfaction after the Council.
Considered for a while as the “last chance” summit, the recent European Council deserves credit for at least one thing: the realism of the Italian and Spanish rulers, imposed to Germany. Already battling with the Greek crisis, Angela Merkel could not risk opening a second front with two other Mediterranean countries and seeing her popularity decreasing more and more. The Chancellor is clearly aware of that: if she wishes to impose her views and strengthen her leadership, she needs to make some concessions to appear as an accelerator and not as a brake to European integration.
So, Germany does not always win in the end, which does not mean it lost its entire grip, as shown by the debate on the Eurobonds, still rejected by Angela Merkel, even though she adopted a similar scheme in Germany. If Germany wants to become the political centre of the Union and the European integration, it must learn to compromise to better impose its views.”