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Late Thursday evening in Europe a hardened solution to the Greek debt crisis appears to have been worked out.\u00a0 This solution is likely to bring to a close over 18 months of procrastination on the part of European leaders<\/a>.<\/span><\/p>\n Compromise won the day as the head of the European Central Bank, Jean-Claude Trichet, German Chancellor, Angela Merkel, and French President Nicolas Sarkozy, all gave in on entrenched positions to craft a tough solution.\u00a0 Merkel gave in and committed more of her country’s money to bailing out Greece.\u00a0 Sarkozy backed off on his plan to tax private banks to pay for a bailout, a plan that was understandably unpopular throughout Europe<\/a>.\u00a0 Lastly, Trichet backed off on his insistence that the Greek government could not be allowed to default on its debts.<\/span><\/p>\n Analysis:<\/strong><\/span><\/p>\n Here are the details…<\/span><\/p>\n What in this deal is important?<\/span><\/p>\n First, that I can finally communicate details of a plan to my loyal readers is an indication European leaders finally are serious about solving this problem.\u00a0 Instead of a token gesture of support to Greece and then a promise to deal with the heavy issues at some point in the future, Europe finally got real.\u00a0 This is a very good sign.<\/span><\/p>\n As I have written about, the economy of Greece is only about 2% of the European economy, so this crisis was much more about an existential question: Is the EU and its euro zone for real and can we trust it as investors?<\/span><\/p>\n Second, the deal shows that Europeans can compromise to save their own necks.\u00a0 Germany, in particular, had the most to lose.\u00a0 If the euro failed a reinstated Deutsche mark would rapidly appreciate relative to other European currencies.\u00a0 That would make German exports – its number one source of economic power – very expensive and likely crush the German economy, and to a degree well in excess of the cost of any bailout of Greece.<\/span><\/p>\n The compromise also shows France and Germany working together on a European problem for the first time in years.\u00a0 Since Merkel came to power the Germans have been reasserting their right to an individual destiny separate from the EU’s creator, France.\u00a0 That these two nations have worked together means that the EU is finally stronger today than it was yesterday<\/a>.\u00a0 In other words, it has demonstrated the ability to be a body politic when necessary.<\/span><\/p>\n\n