PARIS, Jul (Reuters) – Angela Merkel will deny it, but Thursday’s euro zone deal to rescue Greece again from the brink of bankruptcy puts Europe on the bumpy road to a fiscal union.
By giving their bailout fund new scope to help countries before they are shut out of credit markets, recapitalize banks and buy bonds in the secondary market, leaders of the 17-nation currency area laid the foundations of a European Monetary Fund.
They also made clear this was not the final stage in fiscal integration, with French President Nicolas Sarkozy promising new Franco-German proposals on economic governance by September.
“The EU summit was a historic victory for the French vision of EMU (Economic and Monetary Union)– meaning that it is now on course to turn into a fiscal/transfer union,” said analyst Brendan Bowen of Mitsubishi UFJ Securities International.
The German Chancellor accepted a leap forward which she had blocked in March, when a promised “comprehensive package” to solve the euro zone’s sovereign debt crisis was reduced to half-measures that failed to stop contagion spreading.