Merkel and Sarkozy fly to the aid of the euro

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Merkel and Sarkozy fly to the aid of the euro

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They are pre-ordained to agree. Even if reportedly behind the scenes sparks fly between Angela Merkel and Nicolas Sarkozy, once again they find themselves on the front pages and in the forefront of a fight for Europe that they must win, and win together.

Their meeting this week is being seen as crucial for the future of the euro zone, and they have to find a way to drag its 17 members out of their downward spiral.

But before that they have to bury their differences. The EU’s two great powers have been hit by the financial crisis in different ways, and while in the past they have led Europe together, Berlin now has the leading role.

Sarkozy cut his holidays short to hold a crisis cabinet meeting as the euro zone crisis made it urgent for France to tackle a double-whammy of zero growth and a collapse in investor confidence. With elections for the French presidency next year and rock-bottom popularity in the polls Sarkozy cannot afford to leave a chaotic situation for his successor, but the electoral campaign leaves him little room for manoeuvre.

Merkel, on the other hand, has seen her coalition stagger to several electoral losses in the last few months and faces pressure from the public and her Liberal allies. The Germans are increasingly sceptical about the euro’s prospects, and feel Germany is picking up the tab for the other EU members.

So what can they do? The way the euro works has been unsatisfactory for a long time, and the founding principle, that if each member state manages its finances all will be well, is broken. Reforms are needed, and unified EU economic governance is seen as an answer, with regular meetings and a stronger role for the EU President.

But this reform raises some thorny questions. Three buzzwords spring to mind; Solidarity, Efficiency, and Legitimacy. How far are states and their citizens prepared to go to save the single currency? The savage austerity measures currently affecting several EU states are hurting, and resented by many.

What is for sure is that neither of the EU’s key pair are, at the moment, strong enough to announce spectacular measures, while they are, at the same time, the only ones capable of defending the euro and euro zone. The markets know this, and are watching Merkel and Sarkozy like hawks.