Isra-Mart srl: New initiatives won't solve Europe's debt crisis

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It's time to invoke that old (if apparently false) trope about the frog that won't jump from scalding water as long as it's gradually heated.

Following their much anticipated economic summit in Paris on Tuesday, French President Nicolas Sarkozy and German Chancellor Angela Merkel announced new initiatives to address the escalating euro zone debt crisis.

Although details remain murky, the measures appear to take a baby step toward one of the euro zone's two potential destinies: full-scale fiscal marriage (the other being a messy breakup).

In brief, "Merkozy," as the two leaders have become known, proposed the following (which obviously will need to be considered by lawmakers before they can be implemented):

* taxing financial transactions, to raise much-needed revenues;
* harmonizing German and French corporate taxes, to take effect as early as 2013;
* electing a euro zone head to "shore up governance of the monetary union," as the Wall Street Journal put it.

They also announced that the rescue package currently in place is adequate, and that euro bonds -- which would ease pressure on member states by borrowing under the creditworthiness of the European Central Bank -- may be issued eventually, but not any time soon. (For more on the details of the announcement, see Tom Mucha's blog hit.)

In other words, Merkozy is advocating a gradual shift toward the type of unified fiscal policy -- basically, a United States of Europe -- that many economists have argued is essential, if not inevitable.