By Ray Fleming

Angela Merkel and Nicolas Sarkozy have both made speeches within the past 48 hours urging the conversion of the existing euro-zone into a ‘fiscal union' with binding rules for its members and strict monitoring of them. Sarkozy's presentation was the more exciting with references to reconstruction and refoundation but Merkel was much the more impressive with a very straightforward approach to what she called “a marathon effort”. She also found time to criticise those who had been calling for speedy results (who could she have meant?). The two leaders are meeting on Monday to finalise the propositio

n they want the EU Summit to approve at the end of next week. They are in broad agreement but still have to resolve whether budgetary control of the fiscal union should be the responsibility of individual states, which France favours, or of an EU institution, which is Merkel's preference. A key issue affecting all EU members, whether euro-zone members or not, is whether the creation of this fiscal union will require only minor EU treaty amendments or a largely new treaty, as Merkel believes. Either way this is of great importance to Britain because any treaty change would encourage Conservative EU sceptics to press David Cameron to bargain for repatriation of certain powers to Britain in line with his pledge to the party, but against Liberal Democrat wishes.

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