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The End of Old Europe: Why Merkel's Triumph Will Come at a High Price

The euro crisis summit has caused a deep split in the European Union. Britain has been sidelined, and other member states feel steamrolled by Germany and France. The future of the common currency is as uncertain as ever. By SPIEGEL Staff.

French President Nicolas Sarkozy speaks with German Chancellor Angela Merkel during the EU summit in Brussels. Zoom
AP

French President Nicolas Sarkozy speaks with German Chancellor Angela Merkel during the EU summit in Brussels.

Everything was over after half an hour. At that point the summit, which was expected to be a historic one, had not even begun, and yet it was already clear that it would not end well.

German Chancellor Angela Merkel and French President Nicolas Sarkozy had met with British Prime Minister David Cameron at 7:30 p.m. on Thursday evening. Their goal was to determine how far Great Britain would be willing to go to support the German-French plans to save the euro.

Not very far, it would soon become clear.

Cameron demanded extensive exceptions for his country in the event that the European treaties would have to be amended. Most of all, however, he wanted the British financial sector not to be subject to European supervision. Merkel and Sarkozy quickly made it clear to Cameron that that would be unacceptable.

And so the summit, which was intended to be a turning point in the struggle to save the euro, ended up marking a major turning point in the history of the European Union. In the middle of its biggest crisis to date, the European Union is divided and Great Britain has been sidelined, possibly for the long term.

Reluctant Followers

The remaining countries want to follow the 17 members of the euro zone on the path to the sort of fiscal compact Merkel and Sarkozy have outlined. They want it to become a so-called "stability union," with balanced budget provisions to be written into national constitutions and automatic sanctions for deficit offenders. It's the kind of union that Merkel believes is inevitable.

But many countries are only following the Germans' lead with reluctance. The agreement only came about because investors are shunning the bonds of ailing euro-zone countries, and because even the strong countries are facing the possibility of having their creditworthiness downgraded by the rating agencies. But other countries that have long supported a true economic government are asking themselves why the Germans had hesitated for so long.

The summit was intended to prove to the capital markets that the euro-zone countries are prepared to resolutely defend their currency. There was talk of an endgame in the fight to save the euro, while Sarkozy called it Europe's last chance.

By this measure, the results are relatively modest. And yet, from a political standpoint, they are extremely dangerous -- because they signify the end of the old EU.

The core of the new union consists of the 17 euro-zone governments, which have even agreed to meet once a month for the time being. Around this core is a ring of up to nine countries, which intend to introduce the euro in the long term and, to the extent that their parliaments permit them to do so, will also sign up to the euro zone's stricter budgetary rules. The rest, led by Great Britain, are condemned to third-class status.

The Beginning of the End of Britain's EU Membership?

What has emerged is a construct that most closely resembles the ideas of the French. Paris always wanted to keep the group of decision-makers as small as possible and limit the European institutions' powers. This was meant to prevent encroachment on national sovereignty and make the EU's famous Franco-German motor indispensable.

Great Britain is now largely isolated. As a result, it needs to ask itself what role, if any, it still plays in this new Europe.

Merkel, for her part, wants to prevent Britain and the euro zone from drifting further and further apart. She recently told confidants that it is important to give the British the feeling that they are still part of Europe. But the French see it differently, hoping that they will carry more weight in a union that does not include Britain.

Despite all their differences, Germany has always seen the EU as a political partner of the United States. The French, however, want to establish Europe as an independent power bloc in competition with the Americans. One reason this has not happened so far is that the British have fought to maintain the EU's close trans-Atlantic ties. This dispute will now flare up once again.

Optimists, like former German Foreign Minister Joschka Fischer, believe that Great Britain will eventually join the core group, if only out of self-interest. But many in the UK see Cameron's veto as the beginning of the end of Britain's EU membership.

The German government recognizes the problem, but Merkel believes that there is no alternative. "The question is not whether we prefer to solve the debt crisis with the entire EU or within the Euro Group," says a member of German government. "The question is how we can save Europe at all" -- and the euro.

To ensure the survival of the common currency, the euro-zone members, and the other countries that want to join them, plan to negotiate a joint treaty by March that would foresee German-style "debt brakes" for all countries -- which would be enshrined in national constitutions and which would virtually eliminate structural deficits -- as well as (almost) automatic sanctions for deficit offenders.

Legal Doubts

It is completely unclear, however, whether this intergovernmental treaty would be in accordance with EU law. Even Elmar Brok, a member of the European Parliament for Germany's conservative Christian Democratic Union (CDU) and one of Merkel's close associates, wrote a letter to the chancellor warning her against a treaty outside the framework of the Treaty of Lisbon. Such an agreement, Brok argued, would be "illegal."

The legal departments of the European Commission, European Central Bank (ECB) and the European Council, which represents the member states in Brussels, also internally voiced doubts over the construct. At a meeting of the so-called sherpas (the representatives of the participating governments tasked with making preparations for international meetings) on the eve of last week's summit, a heated debate erupted between Merkel's European adviser, Nikolaus Meyer-Landrut, and the head of the legal department at the European Council.

In the preceding weeks, European Council President Herman Van Rompuy had begged the German chancellor to abandon or at least postpone her plans to amend the European treaties. Instead, Van Rompuy made the case for tightening budgetary oversight with the help of a protocol attached to the Lisbon Treaty, thereby avoiding risky referendums in the individual countries. But Merkel brusquely rejected the idea, permanently damaging the relationship between the two politicians. Van Rompuy said he was "very disappointed" by Merkel, on both a human and political level.

European Commission President José Manuel Barroso even spoke of "warlike conditions." According to Barroso, Merkel and Sarkozy are trying to impose their views on everyone else, even though they themselves can hardly agree on any issue. The fact that the majority of countries bowed to the German-French duo in the end shows how dependent the EU is on its two biggest financiers. Cypriot President Dimitris Christofias described the dilemma in a nutshell: "We really ought to engineer a revolution against Merkel and Sarkozy, but each of us needs the two of them for something."

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