December 5th, 2011
08:54 PM GMT
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London (CNN) - So Nicolas Sarkozy and Angela Merkel have come up with a plan to "save the euro" as the deadline counts down to the Friday summit.

Another plan. But this one is different. For the first time it attempts seriously to tackle the underlying problem and create a "fiscal compact" of better budgetary and management for the eurozone.

Each has got something. Merkel hasn't had to budge on single Eurobonds, Sarkozy has assurances that bond holders won't take further haircuts, which would have hurt French banks further.

And they both agree on automatic fines for miscreant eurozone countries. 'The will of France and Germany'

So we should all be off, singing merrily down the road to recovery, right?

Not so fast. This is the European Union we are talking about. They have to try to get treaty changes agreed by all 27 members, and since that may be too difficult they have suggested just the 17 of the zone.

Oh the UK, Denmark, Sweden and Poland will love being left out of that: Not!

There is no way this process won't get bogged down in the domestic politics of some individual countries.

The only possible hope is that the markets keep up the pressure. It has been the contagion to Italy, pushing rates over 7 percent (although they have now fallen back) along with Germany starting to feel the heat too, that has driven this bargain.

The architect of the euro, former European Commission President Jaques Delors, has admitted the currency was flawed from birth.

Now finally they are proposing the radical surgery needed to make it work better. We have to hope (and pray) that they don't drop the ball at this late stage. As Sarkozy said (again) we are running out of time. Quite.

P.S. Anyone who doubts that Europe is the global economic problem at the moment should look at the last set of U.S. data. Manufacturing rising, jobs being created, confidence starting to return and a bumper Black Thursday after Thanksgiving.

The U.S. is starting to get the wind behind its sails. Late, but it is starting. Europe is the one stuck in The Doldrums.

soundoff (22 Responses)
  1. bernardwesly

    Yes, there are some 'intense' activities between the two behind closed doors. But I'm glad they came out happy.

    December 5, 2011 at 10:31 pm |
  2. william

    It's time to face the music, Germany is not France, Holland is not Greece, this whole rotten euro is a mistake and it's time to bury it. Bring back the national currency's, fire these ex communists in Brussels and bring back the EEC. This experiment is just that: a failed one!

    December 5, 2011 at 11:59 pm |
  3. Roelof

    - WIlliam don't compare Holland with Greece. We Dutch were always against having those corrupt garlic countries in the EU (right from the start) and now Holland with Sweden are the biggest payer in this mess created by Germany and France. They should end that EU fund, the autonomy on corrupt Greek and Italian private savings. Let them help themselves.

    December 6, 2011 at 12:32 am |
  4. Anonymous

    US is in the midst of a phony recovery supported by the Federal Reserve. Just wait and watch how the European bond problems spread to US in the next year or two. An economy cannot survive on spending. To grow, US has to start manufacturing again!

    December 6, 2011 at 1:52 am |
  5. Victor

    The US is getting it`s wind behind it`s sails CNN? What a great joke. Europe is trying to balance it`s budget and live within it`s means again while the US has a Budget Gap of 1.4Trillion Dollars for 2011 Alone. Now a debt of 15Trillion Dollars the largest of any nation in the history of the world (and quickly rising). If the US had started cutting hundreds of Billions per year to tackle the US humongous debt pile and try and balance the budget then it`s Economy would be hit extremely hard and non of these upbeat numbers would exist. Growing Economically on Growing Debt is a short lived illusion. A few years down the road you will see.

    December 6, 2011 at 3:10 am |
  6. robert_s

    Going back to national currencies is not an option. Thinking that would 'fix' anything is as delusional as thinking a love relationship can be 'fixed' by taking a break from each other. It'd be the end of the relationship. If you start with quitting at any disagreement, you don't stop at the Euro. It'll continue until there's no more unified Europe left.

    And since the European countries are too small to persist on their own, another European unification attempt would be inevitable. But if the peaceful method has proven to be unsuccessful, people might be seduced to retry early 20th century methods of European unification...

    December 6, 2011 at 5:07 am |
  7. Paul Johnston, PhD Economics


    Paul Johnston, PhD Economics UCLA

    December 6, 2011 at 5:54 am |
  8. robert_s

    Paul, if you think this way, I assume you're a follower of the secessionist movement in the USA? After all, the same would apply to the United States of America.

    December 6, 2011 at 6:00 am |
  9. Paul Johnston, PhD Economics


    Paul Johnston, PhD Economics

    December 6, 2011 at 9:17 am |
  10. Paul Johnston, PhD Economics


    December 6, 2011 at 9:18 am |
  11. anillusion

    It's a debt crisis not a currency crisis. Anyone who has ever visited a southern european country can see the lack of results for all the european subsidies they receive. Why is that? One reason is the lack of technical competence – bridges and roads that have to be rebuilt for example – and the absence of any deadlines for finishing a project and another is WIDESPREAD UNPUNISHED CORRUPTION. It is obvious that the EU just gives them the money and doesn't control how it is spent. We all know how it's spent – luxury cars and big houses for small town mayors, large amounts of cash deposited in foreign tax havens by public officials. It's disheartening for anyone who would like to do business in these countries and the main reason that they are in economic dire straits.

    December 6, 2011 at 10:20 am |
  12. Chunkylover524

    Seems like CNN wants the Euro to fail more than any other news organizations. Its Euro this today, and Euro this yesterday. Everything is so negative. I wonder.....

    December 6, 2011 at 11:09 am |
  13. DEEJ

    Moderators, why aren't you allowing all posts to go through???????

    December 6, 2011 at 12:23 pm |
  14. Steve

    What...??? You mean Europe will now have to live within it's means...What will they do now? They were so used to living lavishly beyond their means...Does this mean no more Governments handouts.. no more blotted pensions?? Yikes

    December 6, 2011 at 2:28 pm |
  15. gerbre

    There is no need to save the Euro because the Euro crisis is not as severe as described in the media. European countries received and will receive money from the ECB. However insolvent countries must set up austerity programs and even switch cabinets to get rid of mismanagement. What we see is a fight between painful change and ECB money. We see positive progress in Greece, Italy, Spain and Belgium. The USA is facing a more critical debt crisis, but it seems nobody cares if states like California are bankrupt for many years. The USA, not Europe, must solve the most important fiscal issue of the next decade.

    December 6, 2011 at 8:27 pm |
  16. milosz

    blablabla and I just ask how you want to have growth if you don't have an oil?

    December 6, 2011 at 9:42 pm |
  17. Antoine

    Are you wearing blinkers, you, all the Americans ? What is happening in the EU isn't a crisis, we are just trying to reduce the debt. So inevitably we hear a lot about this "crisis" (which is not) in the medias. Contrary to you, in the USA, we never hear about a crisis in the USA. Logical, you don't care about the debt !

    Let me remind you that the EU is the largest economy in the world (before USA !) and that our debt represents 80,1% of our GDP against 99,6 for the USA ...

    December 6, 2011 at 10:03 pm |
  18. gerbre

    In the Wikipedia article on "Balance of trade" Waren Buffet is quoted with the words: "The U.S trade deficit is a bigger threat to the domestic economy than either the federal budget deficit or consumer debt and could lead to political turmoil... Right now, the rest of the world owns $3 trillion more of us than we own of them." Both the U.S. and Europe have negative deficits. We should concentrate on this issue first.

    December 7, 2011 at 8:11 pm |
  19. Paul Johnston, PhD Economics


    Paul Johnston, PhD Economics

    December 9, 2011 at 6:10 am |
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