The Euro issues are once more kicked into the long grass and investors lap it up

The Euro Zone (EZ) crisis, the longest and greatest financial soap opera ever (or Greek tragedy if you prefer), is to be brought to an end as Merkel announced that the EZ was heading towards fiscal unity. All rejoice the wicked witch of market meltdown is dead and we can go back to our normal lives: Britain’s FTSE 100 and Germany’s DAX jumped 1.8 percent; France’s CAC-40 climbed 2 percent; and U.S. stock futures rose 1 percent. Those long cold nights with Sarkozy appear to be worth it.

When will this happen? IF Merkel's words are correct then it will take years to achieve. A process of relocating powers from sovereign states to Euro institutions. A process that will more than likely involve years of horse trading between the more affluent north and comparatively poorer south. So that the south can build better economies at the cost of stronger controls over their budgets.

The problem with things taking years to achieve is that, in politics, even a week is a long time, and any all people involved could, and mostly likely will, change. Just look at the Finns, they are getting all anti-Europe and starting to have some robust views on how other economies should be run. When treaties need to be signed by all member states then individual countries, who are less then happy about footing the bill for other poorer or badly managed states, are unlikely to sign without some significant concessions. Concessions which simply have no place when you are attempting to build towards a singular fiscal policy.

This also assumes that the Euro will still be in one piece in a few years time. At present a lot of people, myself included, are more than a little surprised at how robust the Euro appears in the face of some absolutely cataclysmic news doing the rounds (if you are not bearish by now then you must be an eternal optimist). Various member nations regularly teeter on the brink of financial ruin as their debts and borrowing escalate to gargantuan levels and threaten to bring down the state and any neighbouring banks who happened to have lent them a Euro. This, if anything, was what Merkel's speech was aimed at (with a little political ideological opportunism thrown in). The German chancellor is attempting to get the market to go long on the idea that eventually the Euro will work out.

I don't think the Euro experiment can work with all states presently signed up: Italy and Ireland are fine; Greece and Portugal not fine; and Spain will need a more detailed look. Although if it can survive the breakdown of a couple of its members, then maybe Merkel is correct and that we should look to long term process rather than the short term turmoil.

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