There’s a joke told about Gorbachev who, when asked to say one word about the state of the Soviet economy responded: GOOD. When asked for two words: NOT GOOD. The same could be said about the agreement reached Friday. The agreement is good in that the pact on fiscal union gives the ECB what it needs to become a lender of last resort if and when it becomes necessary. Good in that progress was made with regard to increasing the firepower of the loan guarantee mechanisms, the EFSF and ESM. Good in that it did not give Cameron the concessions for the CITY in exchange for his buying in. However, the agreement is not good in that it did not even consider euro-bonds or any other form of pooling member-state debt. It is not good with regard to the substance of the fiscal union, which is all about austerity, with nothing to promote growth. And there is nothing on political union. We remain with technocratic oversight of member-state budgets, and intergovernmental bargains. With no thought to building in democratic legitimacy, say, through European Parliamentary involvement. If the fiscal union fails to promote growth, can EU leaders really expect fellow leaders to toe the line when national publics are out protesting in the street, asking why their leaders are cutting budgets more, rather than trying to relaunch the economy?
Tensions Rise at EU Summit (Wall Street Journal 12/9/11)