Tuesday, 3 July 2012


While I do not believe that German resistance to relaxing reform-measures or pooling debt was anything less than genuine and negotiations were not weighted by some calculated double-bluff, governments and eurocrats gained a way forward without and reached a deal precisely by being uncompromising. Merkel is a talented and clever individual, and I bet once the summit was over and everyone could relax their game-faces, she thought “wait a minute, did you see what I just did there?” Germany entered the conference firm on the position of not altering the stability and rescue mechanisms of the Fiskalpakt.
Eventually, however, Merkel conceded to allow troubled banks direct access to the funds (as Italy and Spain wanted), bypassing the rule that sovereign governments should only have these drawing-rights, which could be used, if they saw fit, to provide their banks with capital. With this allowance, however, Germany mandated the creation of an office to oversee the deportment of beneficiary financial institutions. This stipulation in turn addressed a point of inflexibility on the part of France. Without agreeing explicitly to a solidarity that is domestically unpopular, France expressed a willingness to not surrender national sovereignty to an EU governing board but rather the management of its banks. The agency charged with monitoring the banks is not based alongside the institutions in Brussels, Luxembourg or Strasbourg but rather incorporated into the EU’s Central Banking Authority, located in Frankfurt.