It's taken Germany two decades but finally the euro is being constructed along lines that pass muster in the ministries of Berlin, the corridors of the Bundesbank and, crucially, among the German people.
The summit between Angela Merkel and Nicolas Sarkozy was billed as a clash of the titans but proved no such thing: Merkel spelt out her terms and Sarkozy agreed to most of them.
A new treaty will be needed to agree debt limits for eurozone countries, which will be backed by automatic sanctions. There will be a balanced budget "golden rule" and the European court of justice will scrutinise the budgets of individual countries. The one serious concession won by Sarkozy is that the court will not be allowed to veto budgets made by nation states, something that would have been humiliating for France.
Had these arrangements been in place before the euro was founded, it might have prevented a lot of trouble. The new rules are extremely hard, extremely conservative, and – if implemented – will pose significant limitations on the ability of governments to set their own budgets. The mood in the financial markets is faintly euphoric, on the not unreasonable grounds that someone is at last taking charge.
There are, though, three caveats worth making. The plan does more to prevent a future crisis than it does to ameliorate the current one. There is no guarantee that every country will buy into it. And it is silent on the underlying problem: the lack of growth.
