Merkel urges rapid EU fiscal union

Angela Merkel told the German parliament this morning to prepare for European fiscal union. Merkel promised "concrete steps" towards such a goal requiring "budget discipline and effective crisis management mechanism. "So we need to change the treaties or create new treaties," she said.

A new phase in European integration? And how long could it take, realistically?

Frau Nein

Years and years, must be the answer. Merkel also - again - made clear her opposition to a European Central Bank (ECB) move to issue issue eurobonds sponsored by eurozone club members. "A joint liability for others' debts is not acceptable," she said. "Eurobonds are not a rescue measure in this crisis."

The eurobond question is key to Merkel and the current eurozone crisis. Why should countries with strong credit ratings take on the liabilities of the debts of other countries if member states continue to control their own spending and budgets?

And you can't spray Europe with more easy money from the ECB (or the IMF - perhaps a hybrid of the two, possibly) without more fiscal tightening. But a deal - a rather disjointed one - is slowly emerging.

ECB chief Mario Draghi hinted on progress earlier in the week, claiming "a new fiscal compact would be the most important signal from euro-area governments for embarking on a path of comprehensive deepening of economic integration."

No to easy money

President Sarkozy is in a very different place to Merkel. He has elections coming up and knows if he asks French voters to tighten their belts with more austerity measures, they will kick him where it hurts. (Sarkozy still clings to the idea Merkel will give into ECB easy money.)

Meanwhile the Chinese have joined in. It has been revealed that blunt-speaking Chinese finance minister Fu Ying has told Europe she is, effectively, on her own; China won't be taking on Europe's debt load.

"Foreigners misunderstand how China manages its reserves," the Telegraph has reported her as saying. "They are akin to the country's savings, and that the 1997 Asian financial crisis taught Beijing how important reserves are to the nation."
Read Full Story