Once again, Angela Merkel has held her ground and forced the other EU leaders to accommodate Germany’s policy concerns. This time, it’s a set of amendments to the Lisbon Treaty to deal with sovereign debt emergencies.
See my New Atlanticist write-up “Merkel Wins EU Reform Showdown” for a longish backgrounder. My bottom line, though:
Aside from power politics, Merkel happens to be right here. While there are legitimate concerns being expressed by the European Central Bank and others about running off investors and destabilizing the Euro with talks of private liability for loans to governments who default, there simply has to be a mechanism to force national governments to act responsibly. The common currency forced Germany to act as “Europe’s ATM” and bail out the bad behavior of Greece and others — with very little consequence to bad actors. That simply wasn’t a sustainable position without restoring moral hazard.
