German Chancellor Merkel and French President Sarkozy proposed a Eurozone Commission and President/Director that would presumably mirror but have mandate independent of EU. EU Commission and related structures. This new layer is intended to address structural flaws in the current Eurozone methodology. However, the consequences will impact the definition and evolution of the European project. It is not at all certain that this proposal will address the current crisis and immediate consequences. Immediate Crisis Still Spewing Larva & Black Smoke - Even if No-Eruption for Moment: As to the latter point, the new Eurozone structures may instill greater discipline within the Eurozone as well as coordination. (Presumably Eurozone members would have to adopt a “constitutional” balanced budget provision as well as coordinate fiscal policy through the new Eurozone “government” structures). This may help eliminate or at least minimize the structural mismatch between fiscal and monetary policy Read ARTICLE – “Death of the Euro?” diplomaticallyincorrect.org/films/blog_post/death-of-the-euro-by-ambassador-mo/29753 . However, it may not address the immediate crisis in “PIIGS” (Portugal, Italy, Ireland, Greece and Spain) sovereign debt, as such remain speculative. Further, it is not clear what tools the new Eurozone and institutions will have to discipline transgressors/cheaters over the longer term. More Questions? The “Merkel/Sarkozy Eurozone Initiative” also provides more questions rather than answers, particularly as such relates to the relationship between the current EU institutions and new Eurozone structures. (My guess is that Merkel and Sarkozy themselves only have a broad conceptual framework rather than roadmap as to where all of this will lead): • Will proposed Eurozone structures/institutions marginalize the existing EU framework? • How will proposed Eurozone core affect relationships with non-core states (particularly EU but non-Eurozone members) as the United Kingdom? • How will this proposal affect whole European project and current timetables for enlargement (countries as Bosnia & Herzegovina, Serbia or even Turkey)? • Will there be a backlash, (as during time of referendums and adoption of proposed EU constitution mid last decade), that could swing pendulum in opposite direction? "Merkozy" - Will Rest of Eurozone Join the Party? It is also noteworthy that this set of Eurozone proposals were not born out of a broader EU or Eurozone summit or set of conferences. It was vacation time and Europe and the Merkel/Sarkozy summit was hastily called in response to last week’s dramatics in financial markets. While admittedly Germany and France are the key duality in the Eurozone by size, will other, from the Netherlands to the European Central Bank officials, feel slighted and resist the Merkel/Sarkozy initiative? In the financial markets, the talk is that with this initiative Germany and France have “taken over” the Eurozone and it has been tagged the “Merkozy.” (Top Two Photos of developing Merkozy). However, while a three may be a crowd in love, it may have been politically wise to turn the Mekozy into a European foursome or even threesome - with someone other than Carla Bruni (See PHOTO) Related Reports at “International Financial Crisis Channel” - diplomaticallyincorrect.org/c/international-financial-crisis










 By Ambassador Muhamed Sacirbey










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