Sarkozy's currency battle
Published 02/12/2011 | 05:00
Why all the excitement about another speech from Nicolas Sarkozy?
It looks like he is setting out the terms of a deal to save the euro which he and German Chancellor Merkel will present to an EU summit next week. Both Berlin and Paris have shifted their ground to finally put the bones of a solution together before disaster strikes.
Who blinked first?
Hard to say, but it's a tougher sell for Ms Merkel. She will get French backing for change to the Lisbon Treaty, which would apply legal sanctions to governments that break budget rules. But that can't be in place for several years, whereas the French will get what they want within weeks.
Like changes to our corporation tax?
No, that would be part of the long fight to get a new treaty. They will get big spending by the ECB to guarantee that investors who lend to eurozone governments get their money back.
Surely the Germans won't agree to that?
They won't have to. Technically, the ECB will do it of its own free will. But Mr Sarkozy is "confident" that the central bank will do the needful, and its new boss, Mario Draghi, is already hinting that more action is on the way.
Will it work?
Market reaction suggests something like this should avert the immediate threat of a banking crisis or a government debt default. But the really hard bits -- re-financing the banks, beefing up regulation and agreeing a new treaty that would share burdens as well as impose rules -- have still to be agreed. The immediate crisis may ease, but the problems will not go away.