A lame plan for the next summit

The latest plan to extricate the EU from the sovereign debt crisis, unveiled on Monday by German Chancellor Angela Merkel and French President Nicolas Sarkozy, contains important moves toward deeper economic unity, especially in budgetary rigor. But aspects such as solidarity, that is, the mutualization of responsibilities, are lacking. It is a lame plan, though the mere fact that Paris and Berlin have reached an agreement was well received by the markets.

The plan is a foretaste of the summit to be held next weekend, and the measures are to be complemented by others, in a text prepared by the president of the European Council, Herman Van Rompuy. He should be aware that only a well-balanced final package, in which the carrot and the stick share importance, can generate the required consensus.

The centerpiece is a reform of the Lisbon Treaty, proposed for agreement between the 27 member states if possible, but if not, then between the 17 of the euro zone, with a deadline for next March. In this reform, fiscal discipline is to be ensured by automatic sanctions for non-compliers; enshrining the balanced-budget rule in all the national constitutions; and the empowering of the Luxembourg Court to judge the sufficiency of national reforms.

At first sight, none of these ideas seem out of place. But the whole is insufficient because, contrary to their claims, Merkel and Sarkozy do not sketch out the lineaments of a fiscal union, which will also require a common design of taxation policies; all they propose is more emphasis on budgetary discipline. A reform of the Treaty, under threat, will be made only for the euro zone, in the case of a boycott by a few, yet pressures everyone. But it also opens a Pandora's box of endless, paralyzing Byzantine discussions: the existing treaties took 10 years. The automatic sanctions, yet to be specified, might have been established in the Commission's recent six-measure package.

But the worst deficiencies lie in the vagueness of the mechanisms for emerging from the crisis. There is a sketchy reference to bringing the definitive rescue fund forward to 2012; some backpedaling on private-sector haircuts such as the one arbitrated for the Greek debt; a clamorous silence on the indispensable role of the ECB, and a deplorable rejection of eurobonds. Slim pickings: if there is no improvement at the summit, the cheerfulness of the markets cannot last long.

Major leaps forward have to follow complete road maps, with balanced packages and measures that have immediate effects. This is what Italian Prime Minister Mario Monti has just proposed. His harsh ¤30-billion austerity package hits pensions hard, but improves on the previous one in that it accompanies rigor with somewhat more equity (taxes on luxury goods, higher marginal income-tax rate), and above all, breaks with the monoculture of budgetary rigor, launching selective measures to stimulate growth. If this package goes ahead, it may serve as a blueprint for the whole of the EU.