SINCE 1949, Article 5 of the North Atlantic Treaty has bound NATO members to a solemn vow: an armed attack on one of the alliance shall be treated as an attack against all. With international markets closed to Greece, and contagion threatening Portugal and Spain, European Union leaders agreed to a similar pledge after a pair of gruelling, late-night meetings on May 7th and 9th.

From now on, they in effect declared, markets betting against one member of the euro zone would meet a swift response from all 16. Emergency finance would be channelled to vulnerable governments from an array of fighting funds of up to €750 billion ($950 billion) variously loaned or guaranteed by EU countries, euro-zone members and the IMF (see article).

Markets rallied, for a day or two at least. There was shock in Germany, where critics in the press and parliament accused Chancellor Angela Merkel of allowing the EU to become a “transfer union”, in which countries that stuck to EU rules would find their cash siphoned to the profligate.

From France there was crowing. President Nicolas Sarkozy claimed credit for a plan that he called “95%” French. He hailed the emergence of a new decision-making body at the EU's inner core, made up of leaders from the 16 euro-zone countries. Such a “council of the euro zone”, as he called it, is not found in any EU treaty, but has been a French dream for years.

In Britain a scandalised press claimed the country could pay out anything between £10 billion ($15 billion) and £43 billion to prop up a single currency it did not even use. (The outgoing chancellor, Alistair Darling, said the real sum was £8 billion at most.)

This much is clear: the €750 billion plan is only a temporary fix. The scheme is designed to protect weak links in the euro zone for the next three years, buying them the breathing space to shore up public finances, clean up banks and retool uncompetitive economies so they can grow again and pay off their debts. “If we don't succeed in restoring sound fundamentals in most of the euro zone, this crisis will come back,” admits a senior European politician.

What the scheme is not is a giant leap towards a common economic government, with the power to siphon huge sums from rich to poor bits of the union. It looks more like a mutual defence pact: an attack on one euro-zone member is now an attack on all. Countries that sign up to NATO's Article 5 make a serious commitment. They are asked to send troops for joint training, spend a certain amount on defence and so on. But their pact does not mean there is a single NATO army.

Nevertheless, the rules of the euro zone—supposedly based on a Germanic vision of budgetary discipline and an independent European Central Bank (ECB)—are clearly in flux. The ECB started buying government bonds on the financial markets on May 10th: precisely the step urged on it by EU politicians and big banks. Allies of the ECB's boss, Jean-Claude Trichet, insist he was reacting to market pressures, not assaults on his independence. But the episode caused angst in Germany, and beyond.

EU leaders agreed to a €60 billion facility controlled by the European Commission, funded by borrowing against the EU's central budget, and so ultimately guaranteed by all 27 members of the EU. The legal basis was a bit of the Lisbon treaty that empowers the commission to send emergency money to countries hit by natural disasters or other “exceptional” crises. But leaders resisted a second, much more ambitious move by the commission: to use the same treaty clause to create a stabilisation fund of unlimited size that it would also control, this time borrowing against loan guarantees from national governments.

Instead, at the insistence of Germany and allies like the Netherlands and Finland, the largest part of the euro-zone defence system, a war chest of up to €440 billion, will be run as a “special purpose vehicle” controlled by national governments. It will not be controlled by the commission, and will issue money only under tough conditions set by the IMF.

Are you with us, Dave?

Yet if the new euro-zone scheme has not centralised power, it is an open question whether power is flowing to the euro countries, creating an “inner core” of 16 at the expense of outliers like Britain. On the one hand, Germany remains wary of a powerful euro zone, fearing that the French want to build up a political body with the clout to bully the ECB. Basically, sighs a senior figure, the French still think of Mr Trichet as “a civil servant, appointed by the French government”. Moreover, although Germany and France may both talk about enhanced economic governance, they mean very different things by it: for France, interventionism; for Germany, the harmonisation of rigour.

On the other hand, there is much grumbling about Britain's refusal to join the larger €440 billion defence scheme, when British banks are heavily exposed in places like Spain and Ireland, through cross-ownership and debt holdings (and when Poland and Sweden, which like Britain do not use the euro, will join in). On May 9th a “furious” Christine Lagarde, the French finance minister, confronted Mr Darling, sources say. Other finance ministers asked aloud whether Britain could expect EU solidarity if the pound came under attack.

If Gordon Brown had stayed on as prime minister, it is said, he might have joined the euro-zone defence scheme, though Britain's Treasury was opposed. To David Cameron's new government, even with the pro-European Liberal Democrats on board, the very idea may sound fantastical. But it is not: if contagion hits Spain, for instance, Britain will face calls for EU solidarity.

Mr Cameron says he wants to avoid distracting Euro-rows as he takes office. He may not be able to avoid them.





Economist.com/blogs/charlemagne