Fri Dec 9th, 2011 at 05:06:15 AM EST
As expected, the 27 reached no agreement on the Merkozy Super-Stability Pact, David Cameron (as expected) refusing to accept it unless he got special Flying Island status for the City of London. As a consequence, (they tell us), there is to be a 17-country eurozone treaty with possibly 6 others. Quite apart from the fact that a full-blown treaty would run into referendum trouble and would in any case not be what they call a fast-track solution, there are already noises about conflict between this potential treaty organisation and EU-27 institutions. While Sarkozy is of course trying to portray this as a great success for his diplomacy, (that guy really wants to get re-elected), the Markets™ don't seem impressed: the French spread with German Bunds, after a passage under 1%, shot back up to 1.41% today.
Eurointelligence (by e-mail):
We now have two crises. After last night’s summit fiasco, the eurozone crisis has returned with a vengeance, and an agreement to pursue a 17+6 treaty outside the legal framework is now threatening the future of the European Union itself.
All for what? A wrong-headed insistence on fiscal discipline alone, that prolongs, extends, and underlines the Maastricht rules and will not work in the absence of a central bank that can defend the currency and of a system for balancing current account imbalances. This "pact" will not save the euro; and it may well break the EU.