European Council

A battle has been won

Germany attempts to save face while “Club Med” countries obtain a reprieve: the European press reports that the Brussels summit has made progress on a number of key aspects of the debt crisis.

Published on 29 June 2012 at 15:53

"Mariano Rajoy and Mario Monti — Mario&Mariano — clearly gained the upperhand in a very difficult EU negotiating session," writes Carlos Segovia in the columns of Spanish daily El Mundo —


But it only amounts to one battle in the ongoing war to definitively stay in the euro – In the battle, Rajoy obtained three important results. The first of these, which was largely engineered by Monti, is that European bailout mechanisms will be able to buy the sovereign bonds of countries in difficulty without the intervention [from the troika] that is required for Greece. [...] The second is that the the bailout funds will not be granted the status of priority creditor [to be reimbursed ahead of private creditors], which is of vital importance to sustain future investment in Spanish and Italian debt. [...] The third is that the banking union is to be established sooner than expected […] which means that some of the institutions that are in need of assistance will obtain it without the involvement of national governments. However, the war is far from over, in fact it has hardly begun. We still do not have a solid agreement or sufficient political will for a rapid issue of eurobonds, which is the only way to deter speculative investors from attacking the weaker eurozone countries. […] This is a war that is set to drag on for years.

For the daily El País, the summit highlighted a break with the Merkozy era, in which the Franco-German duo succeeded in imposing their views in discussions. French President François Hollande —

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The underestimated Monsieur Normal […] has emerged to lead the “Club Med” countries in their bid to defend the interests of the European periphery with regard to his cherished growth pact. […] Hollande has adopted a very clever strategy at the summit to ensure that there are no victorious winners or humiliated losers. Everyone will be taking home a prize. The Spanish and Italian governments will be able to sell an agreement that satisfies the demands of public opinion in their countries. Merkel has succeeded in writing herself into many people’s good books, while the serene elegance of the French president has ensured that Paris will not be perceived as Berlin’s sidekick, but as a key player in the agreement and the main supporter of the euro, even if the shared currency does imply a sacrifice of sovereignty.

I**n Paris, Le Figaro remarks that the German Chancellor has decided to back away from her position on a number of issues, ahead of the Bundestag’s Friday afternoon vote on the ratification of the fiscal compact —**


She was supposed to be as hard as a statue in stone, but, under fire from her southern European partners, Angela Merkel finally gave in to a number of concessions — notwithstanding her cabinet colleagues’ assurances that she stood fast by refusing to give in on the main issue of eurobonds. [...] Her tactic was to be inflexible and avoid any form of debt mutualisation. But in Brussels, Angela Merkel set aside a principle that has been hammered home at every level of the Chancellor’s office and the Ministry of Finance since the start of the debt crisis: that financial aid is necessarily conditional on a strict programme of structural reforms in ailing states.

“The deadlock has been broken” remarks Tageszeitung, which argues that the initial results of the summit do not amount to anything more than short-term solutions. For columnist Malte Kreuzfeld, the good news is that the “German diktat” has come to an end —


The real good news from the summit is that the chances of a long-term solution have grown considerably, while Chancellor Angela Merkel’s obstructive strategy has proved to be a disastrous failure. Instead of complying with a German diktat, the other member states opted to widen the conflict by threatening to oppose the growth pact — which Merkel needed to gain German parliamentary approval for the fiscal compact — thereby forcing the Chancellor to give in.

Finally, for Corriere della Sera, the main obstacle to progress at the Brussels summit was difficulty of finding a meeting point for the divergent interests of different countries. However, to prevent the collapse of the euro, a willingness “to change direction” and “mutual trust” will be necessary —


Chancellor Merkel will have to acknowledge that the project drafted by Van Rompuy, Barroso and Draghi represents a credible outline for the processes that will lead to fiscal and banking union. The French President should regard the limited European investment plan as the first step in his programme for growth. Our head of government and the Spanish Prime Minister will have to convince their partners in the European Economic and Monetary Union (EMU) — if necessary by unilaterally handing over some measure of sovereignty — that European initiatives to systematically reduce tension arising from differentials in yield spreads on eurozone debt and the risk of bank failures will have no negative impact on Spain and Italy’s fiscal commitments with regard to EMU and the EU, but will in fact serve to reinforce them.

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