The French prime minister and the German chancellor are walking hand in hand to the next European summit to be held on December 8 and 9, giving the indication that "Merkozy" is an accurate nickname for the pair. Yesterday they agreed to a quick action plan to confront the euro crisis, which calls to question to imminence of disaster in Europe.
Lowering risk premiums in Spain and Italy yesterday show a renewed faith in the latest stage of the recovery, especially after the Franco-German duo made it clear that in the future the ECB would only take on losses in exceptional circumstances.
Merkel and Sarkozy are betting on a new treaty, although they are confining it to just the 17 countries on the euro and could extend it to other nations at a later time. They are trying to establish a stability measure, turn down the Eurobond idea, defend the autonomy of the ECB and promote automatic sanctions for countries that do not abide by the treaty or national deficit restrictions.
They will set a golden rule that requires all member countries to adapt their constitutions to guarantee budget balancing and do away with the myth that countries will lose sovereignty, because the Court of Luxembourg will not be able to nullify accounts that are approved in respective parliaments.
Leaders who have stalled the inner works of European politics for so long are finally putting the survival of the euro project before their own interests.
So this is the beginning of a critical week for untying the mess of sovereign debt across the continent, which without a doubt will lead to a natural lowering of interest rates that feed financing from the banks just when the drums of recession are banging loudly.
