Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

For Britain’s relationship to the EU it was a parting of the ways. It was clear that at least as far as Britain’s conservatives were concerned, a decision would soon be necessary on whether they could continue as cooperative members of the union. For the eurozone what emerged from the clashes of early December 2011 was the lowest common denominator of both options on offer. Germany got its fiscal compact, although it was cast not in the form of the treaty change that Merkel had wanted but in the minimal legal form of an intergovernmental agreement outside the framework of the Lisbon Treaty.65 The terms of the fiscal compact were draconian. In the future, Europe’s budgets were to be balanced or in surplus. By constitutional amendment or its equivalent, deficits were to be restricted to 0.5 percent of GDP. The European Court of Justice was to oversee the transposition of these rules at a national level. States that had a deficit in excess of 3 percent of GDP would be subject to automatic sanctions unless a qualified majority of states were opposed. Countries with debt levels in excess of 60 percent of GDP were required to embark on debt reduction. It was the German debt brake vision transposed to the European level. On the broader issue of completing the eurozone’s architecture, Merkel conceded nothing. There would be no shared liability for European borrowing, no eurobonds, no bank recapitalization and no increase in the size of the EFSF/ESM. The only concession from Berlin...