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Double Secret Failure

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Like the others before it the recent euro-zone summit was a failure, only this time doubly so.

The recent euro-zone summit was a double failure. It failed to achieve the increased European political integration that was the primary goal of German Chancellor Angela Merkel and the other European political leaders. And it failed to improve the outlook for euro-zone sovereign bonds because those politicians continued to insist that only a fiscal union and political integration could limit the interest rates on sovereign debt.

The post-summit communiqué proclaimed that each euro-zone country will enact a constitutional rule to balance its budget, will take corrective action if its “structural” deficit exceeds 0.5% of its gross domestic product, and will face penalties if its actual deficit exceeds 3% of its GDP. Chancellor Merkel had hoped that these rules would be embodied in a revised version of the current EU treaty and therefore enforceable by the European Commission through the European Court of Justice.

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