Early last December, the European Union Council met in Brussels to sign the new intergovernmental treaty (NYT) mandating greater fiscal coordination and budget discipline. This plan was mainly Merkel's initiative with French President Sarkozy's support. Both European leaders signed on December 7 a letter to the Council calling for automatic sanctions for fiscal misbehavior. It is quite evident how essential it is to establish a monetary and fiscal union with proper controls available to put the brakes on improper financial policies when any government may feel free to spend at the expense of other countries with more responsible leaders. Analysts have expressed skepticism over the long-term efficacy of the Franco-German plan in resolving the debt crisis, because the governments causing it refuse to face their constituents with the truth about all that they did wrong for so many years. In addition, citizens of those countries react against any measure to put the brakes on excessive and wasteful economic policies, blaming external ghosts based on demagogic slogans oozing the "imperialists" and "capitalists" arguments.
Merkel can achieve fiscal union in Europe
May. 2.─ Europe, it seems, is the problem. Eminent economists argue that the monetary union is doomed. Last year’s fiscal compact, they warn, is crushing Spain’s economy with unwarranted austerity. If François Hollande is elected French president this month, he may even seek to renegotiate the pact.
We prefer to see the compact as a first step on the long road to joint and several liability for eurozone sovereign debt, and the deeper fiscal union that the monetary union always implied. The next step should be a Europe-wide banking recapitalisation scheme.
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