Tomorrow a week begins that could propel the eurozone towards fiscal unity, change Britain's relationship with its euro partners, and offer a potential route out of the debt crisis and renewed credit crunch which now accompanies it.
The diary of dithering – peppered with set-pieces whose brave talk withered before the severity of the markets' gaze – finally reaches the dates marked in red for action. On Monday, the French President, Nicolas Sarkozy, and German Chancellor, Angela Merkel, meet in Paris to iron out what may well be the somewhat exaggerated differences between them. On Tuesday, the US Treasury Secretary, Timothy Geithner, arrives for a two-day, four-capital shuttle around the continent to make sure everyone understands the enormity of what's at stake. And, on Friday, comes economic D-Day: the leaders' summit in Brussels. Here, after months of Micawberish hoping for something to turn up, Europe's leaders will have to decide and commit, at a meeting likely to change the continent's economic arrangements for ever.
Europe – and especially the 17 single-currency members – has exhausted all avenues for major assistance in the wider world. It now has to deliver itself – a message the US is keen to reinforce, hence Mr Geithner's high-speed grand tour – and at the core of this is a two-pronged plan which may then have to navigate 27 different democracies.
Knowing that good money cannot continue to follow bad down various national drains, Ms Merkel has advanced a plan for containing Europe's crisis, calling for tougher rules to keep national budgets under control. In a speech to the German parliament in Berlin this morning, the Chancellor said she wanted treaty reform (which would need the approval of all 27 members of the EU) to deliver "concrete steps towards a fiscal union" between eurozone states.
In practice, this would mean that countries violating their commitment to keep deficits below 3 per cent of national income and government debt under 60 per cent of GDP would be sent to the European Court of Justice. Quite what sanction the courts could impose, and quite what timescale is envisaged for compliance, is not yet known. The timetable that Ms Merkel has in mind for putting such a plan into rigorous action seems lengthy. "The German government has made it clear that the European crisis will not be solved in one fell swoop," she said on Friday. "It's a process, and this process will take years."
Certainly relying on governments to play by the rules without the threat of sanctions has not worked. The eurozone's current budget rules have been violated 60 times over the past decade by a number of nations – including Germany – but no country has been seriously punished.
The other half of the scheme likely to be discussed in Brussels on Friday involves the European Central Bank (ECB) offering the kind of significant short-term help to heavily indebted governments that might call off the markets' dogs. The ECB president, Mario Draghi, on Thursday appeared to dangle an offer of new, extraordinary measures if leaders at the summit on 9 December can answer his call for "a fundamental restatement of the fiscal rules". He has said that other elements might follow, suggesting the bank could step up its limited programme to buy government bonds issued by struggling countries, thus keeping their borrowing costs down. But Mr Draghi stressed the bond buying "can only be limited", leaving analysts speculating he might have other forms of support in mind, such as extending more credit to banks having difficulty borrowing.
Italy was promising action ahead of the summit as well. Its new Prime Minister, Mario Monti, has pledged to unveil austerity measures and structural reforms at a cabinet meeting tomorrow. He met political parties yesterday, and will see unions today to present his much-awaited plans. His task has been smoothed by the world's leading central banks last week making it easier to borrow US dollars. It was a move intended to calm financial markets, and seemed to work, as bond yields for Europe's more stricken economies came down.
Around Europe, there is acceptance of Germany's lead. France's Finance Minister, François Baroin, has talked about a "Franco-German political impulse" to save the euro. He noted Germany's economic successes compare favourably with France's debt difficulties, and said in a radio interview: "Germany is a model that interests us." Mr Monti has called the German culture of stability one of its "better exports", and added: "I have always been considered to be the most German among Italian economists." The incoming Spanish Prime Minister, Mariano Rajoy, is seen as more open to Germany's leadership than the outgoing premier, Jose Luis Rodriguez Zapatero.
Meanwhile, David Cameron will put saving the euro ahead of reassuring his Eurosceptic backbenchers that he will repatriate powers from Brussels in any new treaty. This position has tentative support for now from the pragmatic Eurosceptics in his party, who are waiting for any clear changes on the future of the EU before making their move.
The former Tory chancellor Norman Lamont said the ex-president of the European Commission Jacques Delors deserved credit for admitting that the eurozone was flawed from the start. Mr Delors, in an interview with The Daily Telegraph yesterday, said a "fault in execution" had meant the euro was doomed to fail. Lord Lamont said: "Jacques Delors' remarks are hugely significant, particularly his admission that those who said you cannot have a single currency without a single government 'had a point'."
Positive indicators: Shafts of light amid the economic gloom
Is there the faintest speck of light at the end of the tunnel? In the past few days, there have been several upbeat developments:
November saw a drop in the jobless rate, with unemployment falling to 8.6 per cent from 9 per cent the month before, a two-year low. This shows that jobs are finally moving in the right direction and suggests the US economy is on firmer footing than many thought.
The FTSE, London's leading share index, had its best weekly performance in nearly three years as investors were spurred on by the latest moves to resolve the eurozone debt crisis. Britain's top 100 listed companies added £100bn to their value as the market surged by 7.4 per cent.
The yield on Italy's 10-year bonds fell back below the critical 7 per cent level to around 6.5 per cent, while the equivalent yield for Spain fell to 5.5 per cent, in a sign that investors' confidence in the country's finances is being restored.Reuse content