A week to remember in the eurozone crisis

German Chancellor Angela Merkel may have managed to satisfy her party, as well as her critics at home and abroad. Photo: Reuters

So often over the past couple of years we have heralded false dawns in the euro crisis. Promises of action left unfulfilled, decisive agreements which politicians couldn't then deliver or remedies delivered months too late to be effective.

The past seven days seem different, however, and may mark a turning point when policy makers finally got the point.

First, the European Central Bank unveiled a potentially unlimited scheme designed to buy time for struggling countries which have been pummelled by markets to reform their economies. It was hardly throwing caution to the wind, the cash comes with many strings attached, but it marks a departure from the orthodox German-style approach the ECB has followed in the past and may be the start of a more flexible era at the bank.

The German Bundesbank is aghast and was the only dissenting vote

Staying with Germany, that country's constitutional court has given a qualified approval to another bailout fund which is part of the complex plan to stabilise the eurozone. Many Germans are concerned that it would mean them writing a blank cheque to the troubled economies of the eurozone.

They may be right but the German court rejected the argument that the fund is unconstitutional.

Also this week, Manuel Barosso, president of the European Commission, gave his state of the union address setting out a vision for a more federal EU with more political and fiscal (tax-raising) union, starting with a banking union. It's a sentiment anathema to many British politicians but regardless of political objections (and there are many across Europe, too) it makes economic sense certainly for the euro area.

Finally, the Dutch election result overnight has delivered a surprising boost for pro-Europe centrist parties as voters rejected more extreme parties on both the right and left which had been demanding a hard line approach to the crisis more immediately in the self-interest of the Netherlands.

The Dutch have become vocal critics of failings they perceive in the crisis countries but if a centrist coalition is formed it is likely to support bailouts.

None of these developments on its own is enough to solve the crisis but each had the potential to make the situation worse if it went the wrong way.

Even taken together they don't represent a solution to the fundamental problems of Europe beset by sclerotic economies and entrenched unemployment. But policy makers seem to have used the summer break to pull together the framework at least to put out the immediate symptoms of the crisis which will allow them to tackle the longer-term issues.

I was in Germany over the weekend where the talk was of Angela Merkel's apparent demand of her diplomats that the crisis be sorted before Christmas, allowing her to concentrate next year on campaigning for re-election.

I admire her ambition but she will have her work cut out to instil the same drive in other leaders to take the many difficult decisions which solving Europe's problems will require. The good news is that this week's progress shows they seem at least to be moving in the right direction.