Charlemagne: Financial fortress Europe

The rules of the euro zone—supposedly based on a Germanic vision of budgetary discipline and an independent European Central Bank (ECB)—are clearly in flux. The ECB started buying government bonds on the financial markets on May 10th: precisely the step urged on it by EU politicians and big banks. Allies of the ECB’s boss, Jean-Claude Trichet, insist he was reacting to market pressures, not assaults on his independence. But the episode caused angst in Germany, and beyond.
EU leaders agreed to a €60 billion facility controlled by the European Commission, funded by borrowing against the EU’s central budget, and so ultimately guaranteed by all 27 members of the EU. The legal basis was a bit of the Lisbon treaty that empowers the commission to send emergency money to countries hit by natural disasters or other “exceptional” crises. But leaders resisted a second, much more ambitious move by the commission: to use the same treaty clause to create a stabilisation fund of unlimited size that it would also control, this time borrowing against loan guarantees from national governments.
Instead, at the insistence of Germany and allies like the Netherlands and Finland, the largest part of the euro-zone defence system, a war chest of up to €440 billion, will be run as a “special purpose vehicle” controlled by national governments. It will not be controlled by the commission, and will issue money only under tough conditions set by the IMF.
For more: Charlemagne: Financial fortress Europe | The Economist