How will history view the family photograph of Europe’s leaders gathering for the so-called make-or-break summit? Is this when the bloc changed gear slipping into a two speed group of nations. Fiscal union and the survival of the euro is the priority but at what cost?
The geography is ,of course, the same but the politics have changed. All 17 countries in the eurozone have said yes to the new deal with a number in the bloc wanting to consult their parliaments. Only the United Kingdom has definitely opted out.
France and Germany led the path to the new agreement underpinned by closer scrutiny and stronger fiscal rule for member states.
“We agreed on a new fiscal compact. It means reinforcing our rules on excessive deficit procedure by making them more automatic. It also means that member states will have to submit their draft budgetary plans to the commission,” explained Herman Van Rompuy, President of the European Council
The failure to achieve an agreement among all members of the EU reflected the deep split between France and Germany on one hand and Britain on the other.
Talks lasted 10 hours with the details to be fleshed out in the coming days. Other critical decisions which were taken include capping the European Stability Mechanism at 500 billion euros. There was optimism including from the European Central Bank as expressed by Mario Draghi the President of the Bank. “It’s quite close to a good fiscal compact and certainly it is going to be the basis for a much more disciplined economic policy for euro area members,” he said.
Has the agreement ensured the survival of the euro? How much has the summit restored confidence in the single currency and how will the international financial markets react? The answers to those questions will be critical.