Two key points stood out to us:
First, she wants a Eurozone “banking union” to be agreed – and possibly up and running – at some point during 2014. However, as we noted in our pre-German election briefing, and which is most certainly being borne out by events, this is a watered down, very German version of banking union. This was clear from last night's (partial) deal on banking union (more on this later). So if you’re the typical Anglo-Saxon economist hoping for a big, joint backstop – don’t hold your breath. This one will be messy.
Secondly, she again hinted at EU treaty change. It’s interesting that Merkel just won't let that idea go. She said,
“Those who want more Europe, also have to be prepared to reregulate new competences…We have a situation in Europe where everyone says, ‘We can do everything to evolve, but they one thing we can’t change are the treaties.’ I don’t think we will develop a Europe that functions in this manner.”Third, Merkel again pushed for so-called "reform contracts" arguing:
"It is necessary to ensure that the required structural reforms are pushed through...[there must be] contractual agreements...We will be discussing such contractual agreements at the European Council for the umpteenth time... [I expect] to see progress."
Translation: if you want us to underwrite the euro, we need 'see-you-in-court' style supervisory powers, firmly grounded in law. That means, EU treaty change.