Would a eurozone government calm the markets?

German and French leaders say setting common budget and tax policies will help end Europe's debt crisis. But jittery investors appear skeptical

German Chancellor Angela Merkel and French President Nicolas Sarkozy are lobbying for a united EU economic government to respond to the continent's financial crisis.
(Image credit: REUTERS/Charles Platiau)

The leaders of France and Germany have come up with a new proposal to resolve Europe's debt crisis: Creating a "true European economic government" to coordinate fiscal policy, and shore up governments teetering on the brink of insolvency. German Chancellor Angela Merkel said after an emergency meeting with French President Nicolas Sarkozy that the move would put all eurozone nations on firmer financial footing and restore "lost confidence." But skeptics said the proposal amounted to well-intentioned window dressing, not the "silver bullet" needed to end the spiraling crisis. Would the plan do any real good?

No, these tired ideas will not help: "It's not surprising that investors gave a lukewarm reaction," says Bernd Radowitz at The Wall Street Journal, with European stocks falling as soon as investors got a chance to digest the recycled ideas Merkel and Sarkozy floated. Their proposal to push eurozone nations to amend their constitutions to require balanced budgets, for example, has already been shot down, and was only resurrected to appease Germans tired of paying for "their neighbors’ fiscal sins."

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