Europe progresses

The project to further enhance the eurozone has ended up dragging almost the entire European Union toward greater economic integration. The decision reflects the gravity of the situation. The priority was to remove the threats to the single currency at the Brussels summit meeting. The way agreed, necessary to end the instability in the euro-zone debt markets, was to establish the mechanisms for fiscal union between member states.

That all the single-currency states have accepted the basic principles of greater fiscal union is a positive sign. There is a clear majority in favor of ceding sovereignty to save the single currency. When the idea for monetary union was first put forward, there was no shortage of willingness, readiness, and ability, along with the political leadership that has been so lacking in recent months. But member states were arguably over-confident that the experience of implementing the final phase of monetary union would help strengthen political, economic, and above all, financial integration. With this in mind, it is no small achievement that up to 26 of the EU's 27 member states backed the Lisbon Treaty reforms agreed on Friday.

The accord is largely based on the points outlined in the letter that Angela Merkel and Nicolas Sarkozy sent to the President of the European Commission on a pact that would facilitate an irreversible process toward full union. For the moment, there has been no strengthening of the European Central Bank's ability to intervene in support of member states facing difficulties in the debt markets, something that is necessary, and has been proposed by the President of the European Commission.

Neither has the Stability Mechanism ? the rescue fund ? been boosted with more money or margin for maneuver to intervene in the sovereign debt markets or to help out banks in difficulties. At the same time, it should be remembered that the chances of such actions are greater at the end of the summit than at the beginning of it.

The impossibility of giving the Commission decision-making capacity in issuing automatic sanctions or the European Court to impose penalties does not mean that the reach of the agreements has in any way been reduced. Neither should it be forgotten that it was agreed to provide the IMF with 200 billion euros to help out countries with liquidity issues.

Friday's agreement should help calm the financial markets by preventing outcomes such as the eventual restructuring of the public debt of major economies that could lead to a breakup or division of the single currency area.

The chance of such outcomes has been significantly reduced, and although economies such as Spain's and Italy's remain vulnerable, they do not face the dangers of financial collapse that they did last week. This is in large part due to the decision of the ECB over this past week to extend the period that banks can borrow from it to three years, as well as requiring less collateral for loans. We are further away from the brink of a collapse of the banking system than we were a week ago. This is particularly relevant to countries like Spain, where businesses are desperate for cash.

The risks of division within the EU have been illustrated all too clearly by the position adopted by the United Kingdom. The UK administration makes no bones of its protectionist stance regarding its financial sector, and that is at odds with the demands of a now global financial market. It is hard to understand Prime Minister David Cameron's resistance in any context other than electioneering, and a bid to win support from the euro-skeptics in his own party, as well as the City of London lobby, which presumably believes that London can no longer compete on a level playing field. In short, it is as though the UK really believed that the rules that everybody else must play by do not apply to it.

The key thing to remember here is that London is once again unconditionally ruling out the UK ever joining the euro, without which, the process of European integration will never be complete. The UK fears that greater integration on the other side of the English Channel will reduce the competitive advantage of its financial services sector. What is less acceptable is that it can veto decisions that are essential to save the European single currency, the basis of the common market that validates decades of European integration.