Last week, after a lengthy summit meeting in Brussels, the heads of state and government of the eurozone made a major decision to deal with the European economic crisis by increasing the level of integration among their economies. Markets all over the world reacted favorably to the decision.
The agreement was facilitated by the political realignment unleashed by the French presidential election, which led to the isolation of the German government.
Essentially, the decision was based on the exchange of two fundamental concessions. First, a German decision to accept that commercial banks may be recapitalized directly, with funding from the European Union. Therefore, without burdening the already bulky levels of a country sovereign indebtedness. In exchange, the European leaders agreed to grant the European Central Bank the authority to supervise commercial banks.
This represents a step forward in the process of European integration, because it gives the European Central Bank, a community institution, a mandate which until now remained in the hands of the national central banks.
Related story: Merkel Defends the Stance Taken at European Leaders' Summit
The decision was severely criticized, particularly in the German press. However, Chancellor Angela Merkel's response was that the German government remained true to its basic principles because there will be "no reward without performance."
That is, to gain access to community financing, commercial banks will submit to the close supervision of the European Central Bank.
Cohen is an international analyst and consultant, a commentator on economic and financial issues for CNN en Espaņol TV and radio, and a former director at the UNECLAC Washington office.
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