German Chancellor Angela Merkel is not one for high emotions. Public speeches are calm and measured. During debates in the Bundestag, she drives home points using repetition rather than rhetorical flourish. Her press conferences at the increasingly regular summits in Brussels are renowned for being low-key affairs. Bad or good news is delivered in the same tone of voice. For colour and indiscretion, journalists go next door to the French briefing room.

Merkel is de facto in charge of the running the eurozone. She is criticised on substance. But her style of delivery has not helped. Many see it as prescriptive and lacking in passion. To her critics, she has – particularly at the onset of the crisis – missed occasions to say why the eurozone is worth saving, how Germans benefit from it and what Germans will lose if it all collapses.

Part of this reticence is due to personality, part due to the fact that she is mindful of the restive parliament and constitutional court behind her. (These last considerations have been directly responsible for the fiscal compact, cementing the German fiscal view of the world into one little unloved and not very useful intergovernmental pact).

Criticism about enshrining fiscal and monetary rigour into the fiscal pact has increased lately. Opponents point to duplication with current or in-the-pipeline laws and, more importantly, say the focus on balanced budgets could prolong the economic crisis.

In any case, the latent resentment over Germany’s fiscal union has obscured Merkel’s other plan for Europe – the political union.

In an interview with five newspapers published on Wednesday, Merkel – in typical understated way – outlines her vision for the future.

The Guardian reports her as saying:

“My vision is one of political union because Europe needs to forge its own unique path. We need to become incrementally closer and closer, in all policy areas. Over a long process, we will transfer more powers to the [European] Commission, which will then handle what falls within the European remit like a government of Europe. That will require a strong parliament.”

A kind of second chamber, if you like, will be the council comprising the heads of [national] government. And finally, the supreme court will be the European court of justice. That could be what Europe’s political union looks like in the future – some time in the future, as I say, and after a goodly number of interim stages.”

She made similar but less defined remarks in front of German parliament following the summit of EU leaders in December noting that “this common sense of responsibility will remain with us far beyond the crisis.”

“Some time in the future” is pure Merkelese – she spent much of last year reminding eurozone watchers – the entire globe these days – that a solution will not appear overnight but only in many year. Nevertheless it is a remarkably bold vision for Europe. It is also remarkably different to current thinking in France. And, of course, Britain.  Which will lead to the “goodly number of interim stages” she refers to.

Has there ever been a time in EU history where a treaty is being negotiated that a) virtually nobody wants b) does not solve the problem at hand c) whose contents are already, or could in future, be part of general EU law and d) deteriorates in quality the more it is negotiated?

Some of these points applied to other treaty-making rounds. But not all of them at once.

The whole point of this treaty exercise – which is using an inconvenient intergovernmental track because of the UK – is political.

Germany needs some sort of pact that makes it look like it will be almost impossible for member states to be big and careless spenders in the future. A fiscal straitjacket. The document could then be served up when Germans are feeling unenthusiastic about mutualising eurozone debt,  or greater involvement of the European Central Bank, for example.

The problem is most of what is in the slim draft (now 16 articles) could simply be done using the normal EU law-making procedures.

The six-pack of economic governance legislation – in place since mid-December – already represents a ground-breaking shift in Brussels’ relations with member states when it comes to budget matters.

New legislation, announced in November, consolidates these budgetary powers still further, giving the commission even greater discretionary powers over national spending.

So what is left? Not much but still two things to which Berlin remains very attached – a constitutional debt brake and automatic sanctions for excessive deficit countries. These cannot be done via the current treaties.

But the “fiscal compact” is having difficulty delivering on just these two points. Language requiring a debt brake to be written into national constitutions has been softened when compared to earlier versions, to head off any referendums.

Meanwhile the very (German-esque) essence of the treaty – namely language getting fiscal miscreants to cut their deficits – has also been softened.

Under the latest draft, member states may ignore the tough budget deficit limits in case of an “unusual event” or a “severe economic downturn.” Echoes of the not very forceful Stability and Growth Pact. Language allowing the European Commission to take member states to court for not implementing the debt brake has also gone. Instead member states should take one another to court. An unlikely proposition.

Mario Draghi, head of the European Central Bank, and inventor of term fiscal compact had this to say of it on Thursday:

“The wording of such rules needs to be unambiguous and effective.” Hardly a ringing endorsement.

MEPs say the latest draft does not reflect the actual discussions. Technically what the parliament thinks does not matter. But if it were to ultimately reject the outcome, it would make it harder to get the document through national parliaments.

The European Commission will not accept any conflict with EU treaties or establishment of parallel structures. France, quite happy to have parallel structures, does not want the EU institutions having too many powers

Meanwhile, no one wants to set off a national referendum if at all possible.

It is hard to imagine what will emerge by end of January when EU leaders are supposed to give the nod to the first draft.

What a mess. Last week’s meeting will surely go down in the annals of recent EU summitry as the one where the worst outcome was achieved.  For that reason alone, it could be given the ‘historic’ label that leaders are so keen to bandy about.

In sum: up to 26 member states are set to forge ahead with an intergovernmental ‘Fiscal Compact’ treaty. Only Britain has refused to join.

Recriminations about the summit are already flying around. The dramatic outcome seems to have come about as a result of underestimation on both sides. British Prime Minister David Cameron underestimated the effect that his demand for a full protocol on having a veto in financial services regulation – and thus a reintroduction of a veto in the internal market – would have.  The others underestimated the pressure Cameron is under to deliver to his eurosceptic backbenchers.

Late-night, lack of sleep, dynamics surely also played a role. And suddenly by 5.30am on Friday morning, the die had been cast.

French president Nicolas Sarkozy was first off the mark to brief the press. And if the outcome could be perceived as pleasing anyone (aside from Tory eurosceptics, of course), it would arguably be those in the Elysee Palace.

An intergovernmental agreement, where the legal status of the EU institutions is in flux, fits well with a French view of how the European Union should look.

For everyone else, it is difficult to see where the good is.

Britain, the EU’s third largest economy, will now legally be beyond mainstream Europe. Politically it has always been so, and prided itself on being so. But it had a seat at the table. And it had allies. It is hard to see how Cameron will be able to effectively protect ‘The City’s’ interests, as he claims to have being doing, if London is only a bit player in the EU set-up. Was this the outcome London wanted? (Tellingly, while Sarkozy rushed out to tell the press his version of events, it took Cameron about half an hour to appear).

For Germany, too, it is a poor result. Berlin had pushed for full EU treaty change. More than any other country it wants more Europe to solve the eurozone crisis.  It is now stuck with what is by its own admission a “second-best” solution.  Sarkozy’s interview with Le Monde, published Monday, will remind Berlin of this.   “We will not delegate our economic sovereignty to others,” the president said.

A full treaty change would have been difficult to implement. And there was little appetite for it. But the scale of the process – with MEPs, MPs, and member states – could have resulted in some balancing of the ‘Fiscal Compact’ agreed on at the summit. The  Compact is about discipline only. Solidarity and growth are not addressed. (And Ireland may have a referendum anyway).

So what are we left with? A fundamental change in the state of EU affairs.  The 17 eurozone states are now the core of the EU. (“It should be recognized that another Europe is emerging: that of the eurozone,” Sarkozy told Le Monde). Tied to these countries are up to nine others who have pledged, pending approval by their parliaments, to get on board too. In the third tier, currently in isolation but possibly to be joined by others in future, is Britain.

All this for an inadequate deal that has once again failed to draw a line under the eurozone crisis.

Grumbling is part of the run-up to any gathering of EU leaders. There seems to be more it about than usual though –  possibly a sign that this summit may really produce (some of) the goods.

Here is a list of some of the grumbles / issues.

Tightening economic governance in the eurozone -  there are several options.

Full-blown EU treaty change – with all the Pandora-box-drama that this potentially entails

The 17 euro countries forge ahead with their own pact, and the European institutions – according to the Franco-German letter sent Wednesday – play “an important role”. This new accord should be “integrated into EU law as soon as possible”. This is legally and politically difficult. Would need the agreement of all 27 member states.

The protocol 12 option – European Council President Herman Van Rompuy pulled this legal trick out of a hat on Tuesday. This would see Article 126, para 14 – previously unknown to most of Brussels – put into action. This allows protocol 12 – outlining excessive deficit steps – to be changed simply by agreement among EU leaders. Much, though not all (extended ECJ power), of economic governance rule-tightening could be shoved into Protocol 12. However, the final outcome would likely still have to be approved by the UK parliament.

The treaty change question has opened a whole subset of complaining.

The Germans still want to press ahead with full treaty change and have dismissed Van Rompuy’s protocol option as “trickery.” From Van Rompuy’s side there is exasperation that Berlin is not prepared to accept this solution when there is so much reluctance among other member states to change the treaty. But Van Rompuy’s team is quietly confident that their solution will prevail because it is the least complicated and the most legally sound (this last is a reference to the 17 plus EU institutions idea). German officials complain that others are not understanding the seriousness of the crisis and the need to take quick decisions – something bound to cause some spluttering as this is what Germany has been accused of from the very beginning.

The Franco-German letter, outlining what the economic governance future should hold, is also raising hackles.

The Finns say they cannot accept the proposal to introduce “super majority” decision-making when it comes to the permanent bailout fund (ESM). Finance minister Jutta Urpilainen called it an “alarming arrangement.” They are also against ruling out private sector involvement in future bailouts under the ESM. (In a major climbdown, Germany has agreed that language in the ESM treaty requiring insolvent countries to negotiate bondholder losses has been removed.)

Meanwhile proposals by Van Rompuy that the ESM be given a banking certificate have long been opposed by Berlin. Finland and the Netherlands are also unlikely to support this.

Ireland, which views EU treaty change through referendum-tinted specs,  is heading to the negotiation table wanting to make the terms of its EU-IMF bailout deal more flexible. It was thoroughly irritated at bilateral summit in Berlin last month when its demands to this end fell on deaf ears. It is now also alarmed by Paris and Berlin’s push for a common corporate tax base, something Dublin views as tax harmonisation, via the “back door”. (Incidentally, Enda Kenny, the Irish PM, is heading to the summit with 12 advisers, the Irish Times tells us).

Eurobonds are another bone of contention. Germany is refusing to consider the idea for now. But the European Commission and  Van Rompuy have kept it on the table. (This forms part of the solidarity/discipline debate. Those complaining about Germany’s solutions to the crisis say Berlin is only focussed on budgetary discipline. A fiscal union cannot exist without some form of  solidarity).

Financial transaction tax – France and Germany are eager to push ahead with this – mentioning it again in Wednesday’s letter. Fiercely opposed by the UK (with the biggest financial services sector in Europe), it is not much liked by the Netherlands either. Berlin and Paris also want to push head with pan-European regulation of finance. Again Britain is not a fan.

Role of the UK – This would need a whole separate blog to itself. Suffice to say that Prime Minister David Cameron, hemmed in by a fiercely eurosceptic Tory party, is heading to Brussels with fists raised and amid a flurry hardball statements on what he will and will not allow other member states to do.  Other countries, which normally allow for Cameron having to play to the domestic gallery, are increasingly exasperated by the tone.  However, the three options outline above would need to be oked by the UK in some way. Of most concern to the UK is it financial services sector. It is worried that if the 17 eurozone countries go off for a permanent huddle, they will opt for more protectionist measures that affect the internal market.

London is already extremely concerned about Sarkozy’s idea to have monthly meetings of eurozone leaders – not so much for the meeting themselves but for the fact that they are supposed to discuss competitivity and growth,  issues that ought to be discussed by all 27 member states, it says.

So where does that leave us? Possibly forgetting that, amid all this treaty talk, solutions are needed now, such as on boosting the current bailout fund (which has failed to attract investors in anything like the order of magnitude that is needed.)

Alarmingly the Germans have said they have no plans for the weekend. Other diplomats – possibly those with plans for the weekend – have suggested they think a deal will be place by Friday evening.

It’s anyone’s guess what the outcome will be. But the meeting could see agreement on all changes that would not trigger a referendum in Ireland and other countries (see this very helpful article), with a promise to carry out more profound treaty change further down the line.

1)   This is it. The summit to beat all summits. This is D-day for the eurozone crisis. You may think you have heard this before. You have. But now Standard & Poor’s have said so, too. So it must be true.

2)   “Bazooka”. First coined by British Prime Minister David Cameron. It is apparently what the eurozone needs. And a big one at that. It’s proved a rather useful term for journalists and politicians alike as it can hide a multitude of solutions. Or nothing at all. Watch out for its use at the summit.

3)   And for eurozone phraseologists, Bazooka seems to have taken over from “doing whatever it takes” to save the eurozone.  This was a similarly catchall/nothing phrase. However, given past form, it is no longer possible to use it with a straight face.

4)   Whereas Bazooka sauntered at a leisurely enough pace into the eurozone disaster lexicon, Merkozy was something of an overnight sensation. Bild newspaper helped us with the visuals. One small quibble. Technically, as a true reflection of the duo’s relationship, it should really be Merkely.

5)    Fiscal Compact. Not a (painful-sounding) medical procedure. But what the *European Central Bank wants in return for going on a spending spree.

6)   * Nobody is really allowed to talk about this institution, as otherwise its independence might be compromised. The omerta-type deal can be gotten around by expressing confidence in the fact that  the * will act in such and such way in a given set of circumstances. A la Sarkozy.

7) Eurozone “Ins and Outs”. The Ins say thank god we were in the eurozone when the crisis happened. The outs say thank god we weren’t. Some Outs remain keen to get in (and some were keen but are less so now). No Ins are allowed to talk about getting out. But one In was told in no uncertain terms it would become an Out if it persisted with its revolutionary ask-the-people chat. It is not legally clear how an In could revert to being an Out. This is self-fulfilling prophecy territory. So no one talks about it. All Outs want a seat at the In’s decision-making table. One Out, in particular, wants a seat at the table but only to make sure it can stop the Ins doing anything it doesn’t like. This makes the Gallic In very angry indeed. The Teutonic In is the only In that matters though.

8)) Treaty-making. Germany wants an exercise in EU treaty change that would involve all the Ins and Outs. France is much keener to see the Ins forge ahead and make their own little intergovernmental agreement together. In the absence of any common EU institution to enforce such an agreement’s rules, France may ultimately feel obliged to call the shots. For the rest, it is a case of deciding which is the lesser of two evils.

9) By quirk of circumstance, ok a court ruling, Ireland’s opinion matters in this treaty debate. It has a potent card to play. It’s called the “oh-oh-that-looks-like-a-referendum-triggering-transfer-of-power-to-the-EU-level” card. Oh the power of the people!

10) The summit will be an occasion to see Herman Van Rompuy again. Last seen at the October summit where he was tasked to look at ways to sort out the eurozone crisis. Including treaty change. Until Germany and France decided to do that for him. Now he will receive the Franco-German proposals on Wednesday, in time to make them look right for Thursday. He’s good for a crisis though. No histrionics. A haiku here and there. It will be nice to see him again.

11) The summit has make or break billing but that is relatively simple stuff. Thousands of journalists will remember with horror the byzantine deals agreed in July and October involving private sector involvement in Greece’s rescue plans. It was of some comfort to find out that EU officials did not understand them either.  This summit should be clear as day by comparison.

12) S&P’s is being given credit for spurring the EU into action. But it does not work alone. French President Sarkozy’s suggestion on Monday that eurozone states meet every month until the crisis is ended should surely prove sufficient enough threat to finally bring the single currency’s crisis to an end.

When Irish Prime Minister Enda Kenny travelled to Berlin mid November, Chancellor Angela Merkel asked him if it was possible for Ireland to avoid having a referendum on an amended EU treaty.

Kenny, according to one account by someone familiar with the meeting, said he did not think so.

The government is in a political and legal bind on this issue. Even since 1987, following a Supreme Court ruling, all major treaty changes have been put to a referendum.

The ruling held that treaty changes involving the transferral of more powers to the EU should be approved by the people.

Of course this is subject to interpretation. Calling a referendum is a political decision as Irish officials are now reminding journalists.

But if Dublin were to decide not to have a referendum, it would leave itself open to charges that it is ducking the issue. It would also leave itself open to a court challenge further down the line.

Ireland’s potential referendum – it took four referendums and lots of political sweat to pass the Nice and Lisbon Treaties – gives it some sway over the talks at the EU summit at the end of this week.

“If there is a transfer of competencies from the state to the EU level then a referendum will be required. If not, then it won’t,” Irish Europe Minister Lucinda Creighton told the Financial Times.

At a joint press conference on Monday, Merkel and her French counterpart Nicolas Sarkozy gave some indication about their thinking on EU treaty change. They  were at pains to stress that the European Court of Justice – whose powers is one of the hot topics of any future treaty – will not be able to annul national budgets.

Instead the court will be able to decide if a country is complying  with the ‘golden rule’ – to be agreed by all 17 eurozone countries – of balanced budgets.

This (fudged) language was intended for French Gaullist ears as much as anyone else. But these legalities will play a key role in whether Dublin feels it can reasonably argue that no referendum is needed.

The current political and economic climate does not favour a Yes. An Irish Times poll in October showing that just 28 percent would vote in favour of a proposal to change the Lisbon Treaty.

If Dublin does go down the referendum path, I expect to hear much more of the argument advanced by Enda Kenny in his State of the Union speech on Sunday.

 Let me be clear – Ireland supports stronger economic governance throughout Europe, and particularly in the Eurozone. In fact, the Irish people are paying the price now for the absence of such rules in the past.

This second line sounds like the beginning of a justification for voting Yes in any future referendum on a reworked EU treaty.

Germany has been receiving some bad press lately.  It has emerged as the undisputed leader amid this eurozone crisis. So it is Berlin’s medicine that is prevailing. Not everybody else in Europe agrees with the remedy, which is seen as too dogmatic, too fixated on balanced budgets to the detriment of growth.  A slow-acting Chancellor plus some holier-than-thou domestic debate in Germany did nothing to stem the criticism.

Further frictions have also surfaced.  Other member states resent the regular meetings between France and Germany to try and solve the crisis (although, from a purely results-based point of view, this resentment is somewhat irrational). While non-euro countries fear that they will not be in the room when plans that affect their future are drawn up by the 17 single currency states.

But for all those capitals grumbling about Germany’s EU leadership, and there is quite some grumbling, I would suggest a read of French President Nicolas Sarkozy’s speech in Toulon. As a small antidote.

Sarkozy spoke right out in favour of intergovernmentalism.

“The reform of Europe is not a march towards supra-nationality. Europe will reform itself by pragmatically drawing the lessons of the crisis. The crisis has pushed the heads of state and government to assume greater responsibilities because ultimately they have the democratic legitimacy to take decisions.”

“The integration of Europe will go the inter-governmental way because Europe needs to make strategic political choices.”

You can bet that an inter-governmental Europe – where the European Commission is minimalised – would not work in small states’ favour. In fact, it would most suit France (and Germany).

Later in the text, Sarkozy refers to “unwavering solidarity” in the eurozone to which all countries and institutions have to work towards.

“This is the raison d’etre of the government of the eurozone that France wanted and which will bring together all the heads of state and government to decide with one another.”

France is much more relaxed about the idea of a core Europe than Germany is. Berlin is pushing for EU treaty change to enshrine budget discipline in EU law. But Merkel wants it done with all 27 member states so it is easier to involve the European Commission and the European Court of Justice in the enforcement. And also simply because Merkel is against putting treaty divisions between those in and out of the euro.

(Although she has also threatened – as a “second best” option – to make an intergovernmental treaty among willing euro member states if this proves too difficult).

While German medicine is unpopular, and there is much to criticise about this endless prevaricating, Berlin does deserve praise for working to keep all 27 member states together.

Well, well, well. That was quite a speech. On Monday evening, Polish Foreign Minister Radek Sikorski went to Berlin, the eurozone’s lion’s den as it were, and told it like he sees it.

Before an audience at the Deutsche Gesellschaft für Auswärtige Politik, including his counterpart “Dear Guido” (Westerwelle), Sikorski rebuked Germany on several fronts:

For not admitting it is the “biggest beneficiary” of the current set-up; for allowing the narrative about others’ profligacy to run unchecked; and for not being more self-critical about the role of German banks which “recklessly bought risky bonds.”

The greatest threat to Poland’s prosperity is not terrorism, the Taliban or German tanks, or “even” Russian missiles but the “collapse of the eurozone,” said Sikorski.

“Because of your size and history you have a special responsibility to preserve peace and democracy on the Continent.”

Sikorski is tapping into what has regularly been alluded to in newspaper columns  and muttered obliquely in national capitals but he is the first politician to challenge Germany so directly.

There are not many countries that can do that, and in these terms, at the moment. France, the weaker partner in the Franco-German duo, could not. Spain and Italy also in trouble economically could not. The UK, for all sorts of historical as well as current europolitical reasons, could not.

Small countries could, but risk looking silly. The leftover list is short. Poland can because it is a big country, a neighbour, and its economy is doing relatively well. And it could use the historical references it did precisely because of the history the two countries share.

Germany’s vision of Europe is prevailing at the moment. It is pushing ahead with changes that will see much greater fiscal discipline in Europe, if possible enshrined in a reworked treaty.

This is understandable.

It wants to prevent a Greece-type situation, where a country fiddles the accounting books, from ever happening again. Other EU countries are more or less willing to go along with Berlin’s view.

But there has been much grumbling on the way. There is no great appetite for treaty change. There are concerns about centralising budgetary oversight at the EU level without some sort of democratic payoff. And, mostly, there are real fears that Germany is prevaricating too long over side issues, while the crisis itself deepens with huge social costs to many European citizens.

It can very well be seen as glib to pull the ‘War’ reference as a way of defending the European Union. A speech given by Jacek Rostowski (Polish finance minister) in the European Parliament earlier this autumn came across as hollow scaremongering.

On the other hand, the glue that holds societies together, even long-peaceful and relatively prosperous ones, is thin.

It does not take too many pressures for them to come unstuck. At the very least, this could lead to a rise in nationalist and populist parties around Europe (such parties are already on rise) and economic nationalism.

German political discourse has been dominated by fears of how much any eurozone-saving solution – such as eurobonds – will cost the German taxpayer. It is good to have this domestic discussion rudely interrupted every now and then with some pointed (and public) criticism from friends. After all, the fate of the entire eurozone lies in Chancellor Merkel’s hands. This is not  just about German taxpayers. It is about all the EU’s citizens.

Is it possible to have a fiscal discipline union before a political union? On Wednesday the European Commission is going to unveil proposals to vastly extend its budgetary oversight powers.

The move is part of an attempt to make budgetary surveillance so tight, and therefore the likelihood of a euro state fiscally misbehaving so slim, that Germany will ultimately be persuaded to sign up to the idea of mutualising eurozone debt.

According to a report in the Financial Times,  the proposals include EU approval of all 17 eurozone budgets and the possibility of putting a country that is in trouble “under some form of administration” by EU authorities.

The draft proposals also suggest that the commission could ask governments to change policy decisions if they are seen as pushing the country concerned into excessive debt.

“If we want a common currency, we have also to share some discipline. In a monetary union we need to acknowledge this kind of interdependence,” Commission President Barroso said Wednesday afternoon, standing alongside Mario Monti, the new leader of Italy.

The significance of such steps is not to be under-estimated.

Of course, the proposals are a result of the ever worsening eurozone crisis. And we are where we are with the crisis, which is to say politicians are rushing to patch up the shaky foundations underpinning the euro. And they are being hounded by disbelieving markets all the way.

Once content to treat German and Greek debt as equal, markets have now become ueber-sceptics. And nothing short of a complete fiscal union will do. EU politicians have in the past said they will do everything it takes to save the euro. Before going on to do as little as possible to get themselves through the particular crisis summit of the moment.

This is a reflection of the vast and complicated nature of the problem as well as the different visions that EU leaders have of what “everything it takes” actually means.

So far it is translating into more power for Brussels.

“We need strong institutions with the power to act,” says Barroso. But will the institutions be stronger without political accountability?

I reckon we need to go the whole way. The budgetary oversight needs to be accompanied by a thorough reform of the EU’s political set up. It could be along the lines of what Finnish Europe minister Alexander Stubb and German Chancellor Angela Merkel’s CDU party suggested last week. So, a president of the European council and commission rolled into one, directly elected, a bi-cameral system with the parliament and the council of ministers, with the right to propose legislation. A parliament with representation reflecting the size of the member states.

During the press conference with Monti on Wednesday, Barroso repeated that the advantage of giving the commission more powers is that it is above politics.

“After the the Second World War, the countries that founded the European community created supranational institutions, and now we have the European Commission, the European Court of Justice and the ECB. Why? Precisely to have independent assessment and monitoring and also if possible independent enforcement mechanisms that are not subject to political manoeuvring.”

Given the kind of powers the EU has now and will soon get in the future, this trend towards validating technocratese is unhealthy. The EU needs more politics not less.