A day many feared turns into a great one for EU

September 12, 2012

THE HAGUE, Netherlands (AP) — It was Super Wednesday — a day dreaded by many in the European Union not so long ago.

By nightfall though, a sigh of relief settled across much of the continent. From ornately dressed judges in Germany to Dutch voters biking to polling stations and nervous traders on the stock floors, much went the way European Union leaders were hoping.

Early in the day, perhaps the biggest decision of all came from the constitutional court in Germany, which had to rule on that country's participation in a euro500 billion ($640 billion) bailout fund, underpinning efforts to contain the debt crisis. Rule against it and financial chaos beckoned. A staunchly independent institution, the Federal Constitutional Court still went with the government and the rescue program.

"It is a good day for Europe," German Chancellor Angela Merkel said. In the Netherlands, the strong showing of euroskeptic politicians during the summer campaign threatened to turn a founding member of the EU into a liability for those seeking closer cooperation in Europe to deal with the debt crisis.

When the exit polls showed, it became clear outgoing prime minister Mark Rutte and social democrat Diederik Samsom would be in the driving seat to form the next government. Both see European cooperation as the way ahead.

Boosted by the ruling in Germany, markets around the world were going up and the much-maligned euro breached $1.29 for the first time in four months. And instead of a fast slide downwards in case of a court rejection, stocks markets held their own, with some even showing slight gains.

"There is only good news today," Piotr Kaczynski of the Center for European Policy Studies said, in marked contrast with the months of depressing developments that had some predicting the demise of the euro currency and the disintegration of the 27-nation EU.

"It shows a Europe that is trying to turn the page. It is a good sign for Europe to get out of the rut," Kaczynski said. Whether it is a turning point is far too early to tell. As the positive news spread around Europe, Greece, as so often, spoiled the party with a new wave of strikes to protest spending cuts, which are key to provide the country with rescue loans.

HOW BIG WAS THE DECISION IN GERMANY? The creation of the European Stability Mechanism rescue fund for indebted governments is seen as crucial to contain the crisis that threatens the world economy, and so was participation of Germany, the economic juggernaut of the embattled eurozone.

Positive momentum had already been created by the European Central Bank's decision last week to buy unlimited amounts of short-term government bonds issued by troubled countries. A negative court decision could have dampened the upbeat mood immediately.

"Today, Germany is once again sending a strong signal to Europe and beyond," Merkel said. "Germany is assuming with determination its responsibility as the biggest economy and as a reliable partner in Europe."

"Within less than a week, the eurozone has finally received its long sought-after impressive bazooka," said Carsten Brzeski, an economist with ING in Brussels. WHAT WILL THE DUTCH ELECTION RESULT BRING?

Just a few weeks ago, polls and campaign talk were dominated by Socialist Party leader Emile Roemer, who bragged that fines imposed by EU headquarters for financial digression would only be paid "over my dead body," and by populist firebrand Geert Wilders, who predicts the death of the euro and wants the Dutch to turn their back on the EU headquarters in Brussels.

Both were left licking their wounds on Wednesday night, especially the anti-euro Wilders, who exit polls showed had lost almost half of his seats in parliament, dropping to 13. "In Brussels they are now celebrating but we are facing several tough weeks ahead," Wilders said.

Roemer, once vying to win the elections outright, was stuck at 15 seats. Instead, pro-EU prime minister Mark Rutte saw his VVD surge with 10 more seats to 41, just one ahead of Social Democrat Diederik Samsom, who also backs European integration, according to exit polls.

That should keep the Dutch firmly in Europe's camp, even though strategies are sharply different on how to deal with the widening economic crisis. The difference between Rutte and Samsom reflects the deep divisions within the EU and among the 17 nations who use the common euro currency. As a socialist, Samsom is in the camp of French President Francois Hollande and with nations who spend their way out of trouble. Rutte is with Merkel and wants to pare back spending to get government finances on track and lower borrowing costs.

WHAT ELSE HAPPENED TO MAKE THIS SUCH A HUGE DAY? In Strasbourg, France, the European Commission was asking national governments to give up control of their banks to try to solve its crippling financial crisis.

In a proposal that represents one of the most significant surrenders of national sovereignty since the creation of the euro in 1999, the EU's executive arm proposed to make the European Central Bank the single supervisor for all 6,000 banks in the 17 countries that use the currency.

Here too, it promises a clash between the nations seeking closer integration and those who staunchly cling to as much national sovereignty as possible. "We cannot continue trying to solve European problems just with national solutions," European Commission President Jose Manuel Barroso said in his annual State of the Union address.

It is hardly a done deal though, since the plan could get vetoed by one or more of the EU nations. "You're unlikely to get unanimity by the end of the year," said Mujtaba Rahman, an analyst with the Eurasia Group. "You're in a comfortable place now, but, at some point, it gets messy."