Yes, for now but Merkel Knows the Dealing Isn’t Done

Merkel managed impressing investors on Friday. The question is, what is next? Spiegel on Merkel’s dilemma going forward.

Merkel launched her counterattack on Friday afternoon. In a post-summit press conference, she said one first has to sort things out after such a long night, and she tried to counter the impression that she had been out-maneuvered by Italian Prime Minister Mario Monti and Spanish Prime Minister Mariano Rajoy.

Merkel underscored that she had pressed to make sure that the rules of the ESM were adhered to. She said she had successfully defended the ESM’s preferred creditor status and that only a single exception would be made, for Spain. Likewise, she noted that, if at all, the ESM would only provide direct assistance to private banks after a long process of setting up a banking supervision mechanism, and that Germany would have several opportunities to exercise its veto during this process.

Yet Another Broken Taboo

Though they were worth a shot, Merkel’s efforts to reframe the debate came too late. The impression that she had stumbled in Brussels yet again had already had too much time to sink in. With her concessions to allow for a relaxation of the ESM’s loans-only-for-oversight conditions and allowing the bailout fund to potentially provide direct aid to banks, Merkel has led the euro zone one more step along the path toward a pooling of debt, an IOU-nion.

This is not the first time that Merkel has surrendered what had been repeatedly heralded as Germany’s final line in the sand. Every step of the campaign to rescue the euro over the last two years has gone from being a taboo to a done-deal that triggers massive public outrage. Indeed, one could even go further and say that the entire history of European integration has been a series of broken taboos.