The Wall Street Journal is reporting that “Euro-zone leaders are negotiating a potentially groundbreaking fiscal pact aimed at preventing the currency bloc from fracturing by tethering its members even closer together.” The paper goes on to note that “[t]he proposal, which hasn’t yet been agreed to, would make budget discipline legally binding and enforceable by European authorities.”
Who is leading the negotiations? You guessed it…Germany and France. One official describes the situations as still requiring “a lot of arm wrestling” to determine the proposal’s final details. Who stands to gain the most if a deal is reached? Countries like Spain and Italy that are facing acute liquidity crises.
Based on European leaders’ performance thus far, this spark of hope may be short lived. But if there is even the slightest bit of momentum towards greater fiscal unity, then there is every reason for talks to continue until all possibilities are exhausted.
