The day after the night before

Yesterday's Franco–German summit produced two major proposals (or re-proposals if you like), aimed at saving (again) the euro and the eurozone economies: a Financial Transaction Tax (FTT) and a 'debt brake' for all 17 eurozone members.

After plenty of initial confusion, Merkel’s spokesman, Steffen Seibert, today clarified that the FTT should be implemented by the entire EU-27, not just the eurozone, saying:

“When you look at the measures the Chancellor and Sarkozy presented yesterday, many of them affect all 27 [member states] and that is the intention with the financial transactions tax.”

That might be a problem because taxation is still protected by national vetoes. The UK today repeated its opposition to such a tax, with a Treasury spokesman simply saying that:

“Any tax on financial transactions must be implemented worldwide.”

Swedish Prime Minister Fredrik Reinfeldt has also slammed the idea. In other words, an FTT at the level of all 27 member states looks like a non-starter at the moment (which is good news, since the idea would create a whole lot of losers and very few winners).

As for that other idea, the debt brake, Merkel and Sarkozy stated:

"Before the Summer of 2012, we want that all 17 eurozone member states adopt the golden rule in writing in their Constitutions, the rule that national budget laws are aimed at achieving a balanced budget."

As this is effectively a purely national measure, it will be completely up to individual member states whether to go along with the idea. Finnish Finance Minister Jutta Urpilaninen has already expressed her opposition, saying:

“Finland successfully takes up its responsibilities for national debt with its government programme and there is no need to write this [i.e. the 'golden rule'] into the constitution.”

Changing constitutions in countries like the Netherlands isn't exactly straightforward either, requiring the dissolution of the Lower House of parliament and fresh elections, which takes time and is politically messy. In Italy, a two-thirds majority is needed in both houses, while in Ireland we might possibly be looking at a referendum.

Calling MPs back from their vacations to rubber stamp yet another bailout package/EU Treaty change is one thing, but asking them to risk their jobs to rubber stamp a constitutional rule to prevent them from spending too much money is another entirely. That's not to say that we don't agree with the principle of spending within one's means.

Only one day after the latest Sarkozy-Merkel summit, two of their headline-grabbing proposals already seem dead in the water. Today, Trends, the leading Belgian business magazine depicts EU leaders (and US President Obama) and carries the title "who still believes these people?".

Let's not answer that question.