Europe in the Last Chance Saloon

European leaders are meeting again on Friday to negotiate a way out of their debt crisis and restore the credibility of the euro currency. Or so they hope. If they fail, economists say the shockwaves could derail the U.S. recovery.

You'd be forgiven for thinking you've heard this all before. This is the fourth recent European get-together that's billed as a make-or-break "summit to end all summits," and the "last chance to save the euro."

Yet there's no doubt that the stakes are high. Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France have spent the last week talking up the importance of the summit. Sarkozy, who faces an election next year, has said the very existence of the European Union is under threat.

European leaders are expected to discuss ways of limiting structural deficits and increasing the firepower of the eurozone bailout fund. The European Union is based on several founding treaties, as well as subsequent amendment treaties, that have been agreed to by all member countries. Germany and France now say they want changes to those treaties to guarantee budgetary discipline.

The problem is that treaties can take years to negotiate and ratify, and the markets have shown that they're in no mood to wait. All 27 E.U. member countries have their own domestic concerns that can make compromises a fiendishly difficult business. The E.U.'s Treaty of Lisbon took eight years to negotiate.

As European officials already acknowledge, new rules that come into effect several years down the line aren't going to do the trick. So there's talk of a fast-track "fiscal compact" that won't require treaty changes. To further complicate things, discussions are underway to see if reforms can be agreed to by the 17 members that use the euro and without the approval of those E.U. members that retain their national currency.

It remains to be seen if Europe's leaders can agree on a deal that will help those countries with massive debts, and persuade the markets that they can weather the storm. The rest of the world, including the White House, will be watching closely, and the outcome of this latest summit will shape European politics for many years to come.

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