Being out of the loop for a few days allowed me to take some distance from Friday morning euphoria regarding Europe's most recent summit. Looking at the cold reality of what has been agreed, a fiscal pact seems to have been struck by Europe's 17 (maybe 24 soon). This falls well short of what is needed to repair the problems, but is a first and significant step in the right direction.
Most amazingly, reading the data available shows there are numerous ways for a country to derogate from the targets and stil escape from financial penalties. Amusingly enough these penalties are not spelled out anywhere -- but the derogations are!
Fundamentally, the initial problem persists; the only proposed solution is a deeply "protestant" one "those who overspent have to cut expenditure" -- there is no element of debt forgiveness. An unrealistic (but locally for Merkel, politically expedient solution) position that assumes that the lenders don't share the blame (funny enough US banks are saying the same thing about US mortgages). Circumstantial evidence points to a German public which strongly believes that its leaders (politicians and bankers) strike the right pose.
The problems for Greece, Portugal, Spain and Ireland remain unaddressed -- how will they finance their maturing debt obligations and who will provide the additional credits? Debt forgiveness seems to have been removed from the table by Sarkosy, who, at the beginning of an election cycle, cannot politically afford the nationalisation of several French banks (the result of debt forgiveness in the PIIGS). The questions for Sarkosy and Merkel is are they too late? The story of Europe's crisis is one of missed opportunities. This recent fiscal pact would have worked wonders two years ago -- as a first step, but you don't bring a jug of water to a house fire, you do that when the flame reaches the drapes, not when the roof is ablaze.