This piece also appeared as an op-ed in Die Zeit on August 17th in German (http://www.zeit.de/wirtschaft/2011-08/euro-merkel-sarkozy). It has been reprinted here in English with permission from Die Zeit.
Throughout the euro crisis EU leaders have never missed an opportunity to miss an opportunity, and yesterday’s meeting between German chancellor Angela Merkel and French president Nicholas Sarkozy was no exception.
Ms Merkel and Mr Sarkozy made it clear in a joint statement following the meeting that their focus is on European governance and that the core countries’ coffers will remain closed until greater fiscal discipline is achieved.
Most of the measures announced by Ms Merkel and Mr Sarkozy miss the point or will be impossible to implement. More important than the measures that were announced are the measures that were omitted.
The two leaders insisted that the European Financial Stability Facility (EFSF) will not need to be enlarged and that eurobonds are not currently being considered. A line cannot be drawn under the crisis in the short-term without the former or in the medium- to long-term without the latter.
I am certain that market pressure will force euro area leaders to expand the EFSF soon. It is unlikely that the core countries will ever sign up for eurobonds though, in which case the only alternative is euro area break-up.
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