Photo: Flickr/World Economic Forum
For a sober take on last week’s EU summit, check out Wolfgang Münchau at the FT, who argues that it was really Merkel who won the summit last week, and that nothing has changed.Here’s the gist of his argument:
- The ESM (Europe’s main bailout fund) has no more money than it did before.
- It’s not big enough, especially if it’s going to bail out Spain’s banks and reduce Italy’s borrowing costs.
- Germany gave up no new euros.
- Italy still has to face a troika program to get its budget under control.
- The ECB isn’t any more involved than it was.
- The Spanish banking bailout will still require outside supervision.
- It’s not clear that the ESM really has the power to recap banks under the current treaty. That may require votes.
The most important event last week was probably not the agreement at the summit anyway, but the statement by Ms Merkel that there will be no eurozone bonds “for as long as I live”. My belief is that this statement reveals she is not serious about political union, to which she has been paying lip-service over the past few weeks. Her tactics remind me of the “coronation theory” of the 1980s: the Bundesbank used to say that monetary union was acceptable but only after full political union was completed. It was another way of saying never. I always suspected all this talk about long-term solutions might be a ruse. Now, it seems, we know.