Yes, while we're all going nuts around here about progressivism, neoliberalism, conservatism and plain-old wackjobism, France and Germany are getting together to figure out what to do about the Euro and their "littoral" problem.
You see, Portugal, Italy, and Greece are in danger of bringing down the Euro currency.
The US Markets took a big drop this afternoon after Europe posted weak growth, but the real news is what Merkel and Sarkozy plan to do about it.
From the WaPo:
Of particular concern was a sharp slowdown in the German economy, which had been among the continent’s leading strengths but saw its second-quarter GDP rise only 0.1 percent, compared with 1.3 percent in the previous quarter.
Germany can't rescue Greece and Portugal. George Soros weighs in after the break:
Soros told Der Spiegel that Portugal and Greece leaving would not hurt the Euro or the European Union.
Soros is calling for A Euro Bond as well as asking for Portugal and Greece to leave the Euro currency in order to save it. Presumably themselves as well as they'd be able to issue their own debt.
Berlin and Paris are opposed to the introduction of Euro Bonds.
Sarkozy:
“One day, perhaps, but at the end of a process of European integration, not at the beginning”.
In other words, not for a long time, or until the next crisis, whichever happens first.
Their plan is a unified corporate tax. (Financial Times link, you need to subscribe to read.)
It cannot be overstated that should Portugal and/or Greece leave (willingly or not) from the Euro, Italy and Ireland cannot be far behind.
An additional indicator is the flight to the Swiss Franc as a stable European currency, but there are simply not enough Swiss assets for people to purchase. There is also a significant flight to US Treasuries (Fitch announced that US Treasuries are still a AAA sovereign asset, irrespective of S&P).
Until Europe (and by this I mean France and Germany) have a solution to financial difficulties of Southern Europe, and the taxation scheme seems suspect to this diarist, expect jitters to continue but remember that the economy of Germany is NOT big enough nor hot enough to save the Euro by itself.
Soros might be right -- time to dump Portugal and Greece, but Italy won't be far behind and I wouldn't be taking long odds on Ireland, either.
So, what ARE Germany and France going to do about it? Apparently they plan to adopt a common corporate tax system by 2013.
Merkel:
Germany and France feel absolutely determined to strengthen the euro as our common currency and further develop it
It seems that despite Soros' call to Portugal and Greece, as long as Merkel is in power in Germany (an increasing rocky period of time, no doubt), they're not going to dump any countries from the Euro.
However, the contagion is in Europe and we'll continue to see spasms throughout the system until it is solved.