Was this the night the euro was saved? Or will those ten hours go down in history as the meeting that broke the EU? In any event, the heads of government of the 27 EU countries could hardly have set the stage for the ongoing finale of Operation Save the Euro any more dramatically.
Before the actual meeting on Thursday evening, Angela Merkel, Nicolas Sarkozy and David Cameron had already got together in a threesome: the Briton, that much was certain, would play in a major role in the coming hours. What followed was a hard, sometimes very hard struggle before the French President, shortly after five in the morning, came out to announce the outcome of the all-night negotiations.
More specifically, there are two outcomes, and in the coming days and weeks the question will be which of the two has more weight: the message that the euro-zone countries have agreed to stricter rules for their fiscal policies? Or the fact that not all 27 states will join in the agreement?
A bad hand of cards went to Cameron
The German position was clear from the beginning: Merkel would like to have had an agreement on changing the treaties with all 27 European Union member states. At the same time, she left no doubt that she would go ahead if necessary with just the 17 euro countries and other willing states. The agreement on the issue was more important to her than the unity of the 27.
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In this the French president stood squarely by her side. Twenty-three countries are now expected to commit themselves to write a debt brake into their national laws and to agree on near-automatic sanctions for those who break the deficit rules. The euro-treaty should be ready as early as March.
The political price for this agreement, however, is high. Britain and Hungary have announced that they will not participate in it; in Sweden and the Czech Republic, the governments must first get a mandate from their national parliaments. No wonder the blame game had already started during the all-night summit.
Who is responsible for the fork in the road? The British Prime Minister David Cameron, who insisted on special clauses in the final resolution to protect the U.K.’s financial sector – or indeed Angela Merkel, who put the treaty amendment topic at the top of the agenda? A bad hand of cards went to Cameron, who is now on the sidelines, having achieved nothing for his country. Knowing the power player that Merkel is, she will have factored this in.
Are debt brakes and sanctions worth a falling out?
The success of the negotiations nonetheless comes at a heavy price. Any impression that 22 states are firmly on the side of Germany would be mistaken. Most of the government leaders are following Merkel rather listlessly, not out of conviction but because they know that no solution to the debt crisis that displeases Germany is possible. Even those who support Germany’s insistence on more fiscal discipline doubt that this is the right time or the right road to travel.
The euro countries will now sign a separate international agreement, which will co-exist with existing EU law. It is a path that has many pitfalls. Some jurists even doubt that such a parallel treaty is even legally permissible.
Is the risk at all worth it? Are debt brakes and sanctions worth a falling out in the EU? As unacceptable as the answer may seem, in the end it is the markets that will decide. If they are satisfied, Merkel will go down in history as the saviour of the euro. But if the speculation rages on, the German Chancellor will be remembered as the one who drove a wedge into the EU.