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How the European Union can solve its crisis

The illuminated euro sign is seen in front of the headquarters of the European Central Bank in Frankfurt.


European Union leaders gather in Brussels Thursday in a last-gasp effort to save the euro currency. But it will be the EU itself, as a political union that can take collective decisions, on the operating table.

The summit promises to be tense and one of the most potentially divisive ones in recent memory, in large part because the proposals under consideration will touch on the political privileges and rights of sovereign governments.

Here are some of the political obstacles to the radical changes under consideration:

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France and Germany want automatic sanctions for deficit-busting countries. Annual deficits are not supposed to exceed 3 per cent of gross domestic product and public debt is to be less than 60 per cent. The euro is now nearly 12 years old but no country that slipped up, including France and Germany, has been penalized for exceeding those limits. They want all EU countries to put deficit limits into law or their constitutions. Another option being floated would trigger sanctions for delinquent countries even before the budgets are presented to parliaments or use the European Court of Justice to review budgets, both widely seen as an intrusive and anti-democratic.


Britain, which is not in the euro zone, is the leading opponent of any attempt to force EU members to standardize policies. Prime Minister David Cameron says he will not give up the power to regulate the financial sector.

Beyond those particular concerns, though, the bigger political sticking point is the divergent views on how much say the EU should have over the policies of its members. Even under the strain of solving the debt crisis, nearly all 27 EU members will be guarding what they see as their sovereignty. Ms. Merkel sees it as the price of guaranteeing financial discipline. Leaders of most other countries see it as political suicide to be seen as giving up decision making to Euro-technocrats.


Should the summit fail to convince world markets that the Europeans are tackling the crisis, the impact across Europe and the rest of the world could end some political careers as the already punishing recession deepens. French President Nicolas Sarkozy, who faces a tough re-election battle, is especially vulnerable. He had been in favour of euro bonds but backed off as a compromise with German Chancellor Angela on fiscal union.

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Germany opposes such bonds, seeing them as a mechanism to make German taxpayers pay for the profligate habits of their neighbours. But Ms. Merkel stands almost alone in her opposition, and some form of combined fund to carry the weakest economies in the euro zone is likely to be one of the hardest-fought issues of the summit.


Mr. Sarkozy and Ms. Merkel say there can be by fairly quick amendments to existing treaties. If all 27 leaders of the EU do not agree, they say the 17 euro zone countries will have to do them on their own. The prospect is terrifying to some of the newer countries in the union, like Poland, which see themselves being pushed further to the margins of the union.

History also shows that the cumbersome decision-making mechanisms of the EU do not lend themselves to swift action.

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About the Author
Foreign Editor

Susan Sachs is a former Foreign Editor of The Globe and Mail.Ms. Sachs was previously the Afghanistan correspondent for the newspaper, and covered the Middle East and European issues based in Paris. More

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