The race to save the Euro lumbers on.

German Chancellor Angela Merkel and French President Nicolas Sarkozy have done a deal for a new European intergovernmental agreement. It’s not an EU agreement, formally, but that’s the way it will work in practice. Nations will have to vet their budgets with Brussels before their national parliament gets a vote. Any country that runs excessive deficits will supposedly find itself in hot water.

The credibility of this solution is zero. Remember that the Euro’s soundness has been “guaranteed” for years by the Maastrict criteria. One Maastrict requirement: no nation adopting the Euro may run a deficit of more than three percent of GDP. Sound familiar?

The problem is not setting out nice-sounding rules. It is living up to them. Some nations, like Greece, lied their way into the Euro; others, like Germany and France, got waivers for their violations. But all around Europe, fiscal discipline has been long on words and short on results.

The EU has spent two years trying to find the magic bullet that will stop the sovereign debt crisis in its tracks. Will the Merkel-Sarkozy agreement save the Euro? Well, earlier this week IMF Head Christine Lagarde concluded that even a full EU treaty would be “insufficient” to regain the markets’ confidence.

Standard & Poor’s has already put 15 of the 17 eurozone nations on “credit-watch negative.” The credit-watch countries include Germany itself, a fact that saps the credibility of everything that both Germany and the EU are trying to do. Since the new agreement is a tarted-up “fiscal compact” that does nothing to change underlying financial realities, it won’t restore market confidence for long.

There are plenty of reasons why a new agreement is no solution to Europe’s financial crisis.

First, even the most incompetent Euro-crat could drive a truck through the loopholes in the new rules.

Second, the new agreement will have to pass through the parliaments, and in some cases the peoples, of Europe. That journey will be perilous.

Third, the EU was supposed to keep Germany in Europe, not be the mechanism for German domination of Europe. The essence of this new agreement is that German standards of budgetary discipline will supposedly be enforced across Europe. Those standards are admirable, but tell the Spanish, the Greeks, and the Italians that in the future they will be taking their orders from Berlin and see how much they like it.

British Prime Minister David Cameron’s dilemma was particularly stark. His mandarins told him that Britain had to sign onto a new EU treaty lest Britain loses “influence.” But the Conservative Party—and most of the country—want to take powers back from the EU, not give it any more. The Tory MPs elected in 2010 are itching to restore sovereignty (and thus democracy) to the Palace of Westminster. And in the end, Mr. Cameron had to agree: he vetoed an EU treaty and forced the rest of Europe to go for an intergovernmental agreement instead.

Let’s play make believe for a moment. Let’s assume the 17 nations of the Eurozone are prepared to give up their fiscal sovereignty to Brussels—or rather, Germany—that the EU brushes aside the inevitable “No” that at least one country—Ireland—will render, and that there is a new treaty soon. Will Greece, Portugal, and the other problem children become economically competitive members of the Eurozone?

No, they won’t. The entire Eurozone economy hardly grew at all in the third quarter. This is not just a symptom of the crisis: it is a fundamental cause. Even if Greece abandons its fiscal sovereignty, it will still be 30 percent less competitive than Germany. A new European treaty might buck up the markets for a bit, but it won’t resolve the underlying issue. The EU’s effort comes down to promising to build a better Titanic next time: it does nothing to help the current passengers.

This December will see the release of the eagerly-anticipated biopic "The Iron Lady." It is worth bearing in mind now what Britain’s greatest post-war Prime Minister said about the EU in 2002: “That such an unnecessary and irrational project as building a European superstate was ever embarked upon will seem in future years to be perhaps the greatest folly of the modern era.”

Sally McNamara is Senior Policy Analyst in European Affairs at The Heritage Foundation’s Thatcher Center for Freedom where Ted R. Bromund is Senior Research Fellow.