Out of Europe overnight we get one of the first signs that Angela Merkel might be willing to blink in her game of chicken with the peripheral sovereign nations. Germany has indicated that they would be open to what amounts to a one-off variation of “eurobonds,” the pooling of Eurozone debt into a common security. However, this would be part of a larger action that would centralize fiscal control throughout the Eurozone.

Pressed by a banking crisis and turmoil in the markets, Germany has indicated that it is prepared to accept a grand bargain that would provide greater support for its most indebted euro zone partners in exchange for more centralized control over government spending in Europe.

The German chancellor, Angela Merkel, said that finding the way to “more Europe, not less” was the next task for Europe’s leaders. “The world wants to know how we expect the political union to complement the currency union,” Ms. Merkel said at a news conference here Monday with José Manuel Barroso, the president of the European Commission. “We have to find an answer in the foreseeable future.”

German officials remain adamant that they are not talking about euro bonds, or jointly issued debt, which they have dismissed as unconstitutional. More likely is a plan to combine much of Europe’s bad debt into a single fund with the idea of paying it off over 25 years, an idea gaining traction in Germany as an alternative to euro bonds, officials say.

I don’t see how this is that different. It’s would be the retirement of old debt rather than a security based on new debt, giving it a time limit, but it would still get issued collectively, meaning favorable rates for the peripherals and worse rates for Germany.

The devil is obviously in the details. It would probably include some collective deposit insurance for the banking industry, but also control by the European Union in Brussels over fiscal policies in the member nations. It would also involve greater intervention by the European Central Bank, to rescue member states directly. But it would represent a further loss of control of sovereignty in a way that may not make the member nations all that comfortable. But a crisis has a way of bringing this about.

Though such a fiscal and financial compact would take years to accomplish, there’s a sense that things are moving right away. Today there’s an emergency G7 meeting on Europe. The markets have taken a shine to this as a potentially real solution for the crisis. There’s no question that this does more than the previous kick the can attempts. The question is whether it will be accepted, and of course whether it’s acceptable; otherwise we could end up in the exact same place.

We could get finalized plans for this integration at a finance minister summit at the end of the month. We’re definitely seeing what one US official called a “heightened sense of urgency” around the situation.

What little details have been released would move the European Union toward an actual union, but that may be a bit much for its members. Moreover, questions would still persist. If the end result is a fiscal compact that demands austerity out of all of its members and can veto budgets that produce otherwise, that obviously will in no way bring Europe out of its torpor. And there’s that pesky Greek election to worry about.

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