As if on the very brink of doom, the euro-zone countries seem at last to be matching short-term measures – additional money supply from the European Central Bank – with long-term measures – some degree of fiscal union acceptable to both Germany and France, the senior partners in the European Union ever since its postwar origins 50 years ago.
It depends upon stretching a few points between now and the European Union summit next Friday. For one thing, the ECB was not designed to be a facilitator of the borrowings of euro-zone governments. But price stability and management of the money supply in the zone are emphatically among the bank’s duties, and there are real dangers of a contraction of credit and consequently deflation, risks that need to be averted.
Hence, Mario Draghi, the ECB’s president, can justify its buying of government bonds from banks (thus moderating the dreaded bond-yield spreads) – though he is quite right to resist any notion of unlimited purchases of that kind.
Meanwhile, the German Chancellor, Angela Merkel, and the French President, Nicolas Sarkozy, are talking about what they have not agreed to – yet.
On Thursday, Mr. Sarkozy reasserted his Gaullist nationalism, rejecting any march toward “supranationality,” but he also called for “more solidarity with more discipline” in Europe – including greater budgetary discipline and shared scrutiny of government finances, so that no buyer of euro-zone bonds will lose a single centime.
For her part, Ms. Merkel openly speaks of fiscal union, but rejects the idea of joint liability through “eurobonds,” that is, some shared responsibility for some portion of euro-zone member-state debt. But there is a qualification here, too. After all, eurobonds could be established in the final phase of fiscal integration.
Ms. Merkel and Mr. Sarkozy’s positions start from contrary premises, but they end up in much the same place. For the future, a more confidence-inspiring system appears to be feasible, and Mr. Draghi and his colleagues at the ECB show a willingness to fend off immediate emergencies. A crisis throughout the euro zone is still avoidable.