The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
) -- No one was impressed by
Chancellor Merkel and President Sarkozy's proposal to have a council that will regularly meet to discuss the stability of the euro. The proposal though should have been expected. The EU, which is a collection of 27 sovereign nations, moves forward by collaborating -- by talking. Perhaps this is because it is the only way that 27 sovereign nations can achieve their goals.
The EU is undoubtedly a magnificent case study in how collaboration can work to achieve great goals. Still, the markets are looking for a silver bullet solution to the seemingly intractable euro crisis, not discussion. Unfortunately, this is not how the EU functions. With regard to the suggestion that the Franco-German duo would propose a tax on financial transactions, this collaborative approach, however, could be good news.
The suggestion of a new tax on financial transactions should have been expected, too. Really anything that could possibly raise funds to support the eurozone's ailing states, outside EU member funding, should have been expected. Merkel, in particular, is under tremendous pressure from the German people who are known to be quite disciplined and productive seeing their money is being spent to prop up people who are less so. A similar reaction would occur if the people in Indiana were asked by Mitch Daniels to transfer their surplus funds to one of the less fiscally prudent U.S. states.
The suggestion of this tax, however, does not mean that it will come into being anytime soon or come into being at all. Taxes in the EU are a matter for the individual member nations. The EU does not have the power to tax. The role of the EU on taxes is to make sure that no taxes are implemented by the member nations that will hinder the free movement of capital within the Union. So a tax on financial transactions would have to be agreed upon by the individual member states and right now, this is only at a proposal stage. Quite a bit of collaboration and consensus building would have to occur -- and on this point, it may not occur.
The market's reaction to the duo's comments made it clear that it would have been much happier if positive indications were given for a eurobond. This would fall into the silver bullet category. Still, no one can blame Merkel or Sarkozy for saying that a eurobond is not being actively considered. Right now, it has the potential to be one of those career limiting moves. Besides, this is not for two EU leaders -- even two very powerful ones -- to decide. However, with further discussions with the citizens within the EU member states, and EU member discussions, negotiations and collaboration, if it is agreed that the most effective way to handle the stability of the euro is with a closer economic union that could support eurobonds, it could happen.
The EU is not a flash in the pan -- nor is the euro. But in the EU, all good things take a little time and right now, its leaders believe they still have time to achieve their goal of preservation of the EU.