The latest report (5th July) from the German Council of Economic experts (Sachverständigenrat) that advises Chancellor Merkel has confirmed that, although the outline of a plan to end the crisis has now been put on the table, EU leaders at the end of June essentially just bought more time but still have yet to agree on a structural solution to Eurozone governance.

In particular, Mrs Merkel's economic advisors reiterate the need to create a European Redemption Fund for the partial mutualisation of debt - something they advocated in a report late last year but which has gained credence as the debt crisis has worsened. The report explains that access to the Fund could be made conditional on acceptance of the Fiscal Compact, including of a sanctions regime for infringement.

The report also describes a second necessary building block as a framework for the banking sector, including a pan-European banking regulator, rules for winding up and restructuring banks and the recapitalisation of banks through the EFSF/ESM as foreseen under the plans submitted to the European Council last month.

Guy Verhofstadt, ALDE group leader and strong backer of the proposals from the German Economic Advisory Council said: "Chancellor Merkel should listen to her own economic experts, even if she refuses to acknowledge the chorus of opinion from fellow EU leaders and the heads of the European Council, Commission, Central Bank and Eurogroup. Without some form of debt mutualisation the problems simply will not go away and we will have constant recourse to the EU rescue funds as one bailout follows another. What we need is a decisive and permanent fix to the current crisis. The answer has been handed to the German Chancellor on a plate. She should take it."
 
"The European Parliament is also convinced by the logic and feasibility of the redemption fund idea and has taken the step of including it as part of the 'two-pack' proposals for better governance in countries experiencing excessive deficits."
 
Note to editors:
Please find attached a summary of the report in English.

For a full copy of the German expert report:
http://www.sachverstaendigenrat-wirtschaft.de/fileadmin/dateiablage/download/publikationen/sg2012.pdf

A full English translation is due to be available next week.