Business, Finance & Economics

Saving the euro: 2012 begins in earnest


So happy to see each other after the holidays: French President Nicolas Sarkozy and German Chancellor Angela Merkel in Berlin today, heading in to their latest meeting on how to save the euro


Sean Gallup

Europe's power couple got down to work on the nuts and bolts of the new treaty for euro zone countries that will, they hope, put the brakes on the sovereign debt crisis. A fiscal compact with penalties for euro zone countries that run deficits above three percent of GDP is the core of that treaty.

At a press conference after both Merkel and Sarkozy expressed confidence the treaty will be done and agreed on and ready for signature by March 1. Agreed on - probably. But my experience tells me to be slightly skeptical about ready for signatures on March 1.

More interesting news to those who follow this as a regular part of their daily existence was Merkel joining Sarkozy in endorsing a financial transaction tax, or Tobin tax, on all EU banks.

According to the Daily Telegraph, Merkel said if all 27 EU members can't agree to impose one she will push to implement it among the 17 euro zone countries. We know that British Prime Minister David Cameron will never endorse a Tobin tax so it will just be euro zone if it happens. The German Chancellor acknowledged her own Bundestag will fight her on the issue.

Merkel sounded bullish, nevertheless. She took the opportunity to say she wanted Greece to stay in the single currency but rapped the Greek government across the knuckles and told it to hurry up and reach agreement with its creditors on debt relief.

The FT reports that when asked if she feared rating agency downgrades of euro zone states, Merkel replied, "Fear is not the motivation of my political activity."

But one thing that motivates all national leaders is the price of oil. The FT notes that a new wrinkle is creating another barrier to resolving the euro zone crisis. The euro is steadily losing value against the dollar - at the same time Iran's increasingly loud threats about blocking the Straits of Hormuz are driving up the price of oil - which is,of course, priced in dollars. A jolt of petro-flation (c) is not what euro zone countries need right now as several of them head into recession.