We’ve talked about the pressure the incoming Trump-appointed Fed Chair is putting on Europe.

In about three months, the 15-year era of global central bank coordination — where the Fed implicitly backstopped the world via unlimited access to U.S. dollar liquidity — is likely over.

Access to dollars becomes Trump’s leverage to influence change in Europe. 

And without friendly Fed coordination, Europe becomes exposed to another sovereign debt crisis (an existential threat), as they are facing trillions of euros in new spending commitments.

So, the EU leaders are scrambling.  They are meeting tomorrow to game plan a way to self-fund their big spending needs (defense, AI, energy), and shore up confidence in liquidity access.

To have a chance at making it all work, they need “unification.” 

They need to finance on the full strength of Europe (a eurobond).  They need fiscal union.

And they will be consulting two former Italian Prime Ministers that have mapped this out — Mario Draghi (also former head of the ECB) and Enrico Letta. 

Both have been vocal in calling for common EU debt and integrated capital markets as necessary for survival of the euro.

That will be the pitch tomorrow.  But they have a problem.  They need unanimous vote, by law.  

That’s where tomorrow gets interesting. 

Draghi saved the euro in 2012, as ECB President, by ripping up the rulebook.

The Maastricht Treaty said “no bailouts.”  He found a loophole and did it anyway.

In the current situation, under unanimity rules, a single country can veto legislation — in this case, the idea of a common debt issuance. 

But Draghi and Letta have a work around plan (ripping up the rulebook again), to require only a “qualified majority.“

This could mean integration in Europe is coming, or disintegration.