Steven Erlanger outlines what the 17 members of the euro-zone spent the day haggling over. The price of Germany’s further cooperation in restoring financial health to the continent will entail chipping away at sovereign powers — as treaties routinely do, but rarely with such broad domestic impact.

The issue that has gotten the most attention is the German-French Pact for Competitiveness, a name chosen for German ears. The intention was to lay down specific commitments to coordinate euro-zone economies — a common basis for corporate taxes for instance, or a common age for retirement — intended to unify policies across the region while raising tax revenue and reducing spending. Wage indexation was to be banned and high deficits punished.

But when the pact was first broached at the European level last month, there was anger from other leaders, who had not been consulted. While the pact might help in the future, it would do nothing to solve the current problems of Greece, Ireland and Portugal. Nor, critics argue, does it deal with a looming problem for Germany and the euro zone — huge private debt and shaky banks, including some German state banks. Berlin has resisted serious stress tests of its banks.

Still, on Friday, euro-zone leaders are expected to approve a watered-down version of the pact, negotiated by the European Council president, Herman Van Rompuy, that eliminates fixed pension ages and wage indexation and gives states more latitude to reach objectives, with monitoring of compliance left unclear. The main fight is about whether to align corporate tax systems, and if so, how to do so.

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This entry was posted on Friday, March 11th, 2011 at 8:00 pm.