The Worm Has Turned

Germany is clearly the largest power in the Euro Zone, but without a sycophant like Sarkozy in France, the 2nd largest power in Europe, it turns out that she actually can’t decree what will happen:

European leaders have moved to halt the crisis engulfing Spain and Italy by agreeing a radical bailout package for the single currency’s teetering banks.

Amid deep divisions over the debt and currency crisis, and under immense pressure to come up with credible moves, Angela Merkel, the German chancellor, softened her hard line on fiscal discipline and debt repayment to hand Mariano Rajoy, the Spanish prime minister, a summit triumph.

Leaders agreed to set up a supervisory system for eurozone banks that will form the first step towards full banking union, scrapped the requirement that governments get preferential status over private investors in the event of a default and eased the stiff terms for future bailouts.

When she has the governments of France, Spain, and Italy unite to oppose her, she had to blink.

I don’t expect her to do anything that she is not absolutely forced to do, but she is not an immovable object, and now the others in Europe realize this.

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