On 2011-12-10, at 1:29 PM, James Heartfield wrote:
> Merkel’s proposal is a centralised brake on all public spending, and oversight of national budgets to achieve that.
It may take some doing to impose German suzerainty over Europe. The EU's Stability and Growth Pact wasn't honoured in better times, and the prospect of stiffer penalties will have no effect on runaway interest rates and fiscal deficits. The European governments fear their peoples have reached the breaking point, and will increasingly resist further austerity, all the more when it is seen as a German-engineered surrender of their national sovereignty. There have been hints that Merkel and the Bundesbank now accept that the gravity of the crisis requires that the European Central Bank massively step up its bond purchases to counter capital flight, but that they can only reverse course if it is accompanied by the appearance of tougher controls on the national budgets of the debtor states. That is what yesterday's summit was designed to accomplish, but it's unlikely to stem investor panic.
The odds are that the ECB will stoke up the printing press well before the Italian, Spanish, and French workers submit to further draconian cuts and escalate their struggles to the level of the Greeks. Failing that, the eurozone will collapse bringing down the European banking system, which is now probably concentrating more minds in Berlin and other European capitals than the fiscal deficits.