Europe

Eurozone crisis: New EU treaty 'may not be needed'

  • 7 December 2011
  • From the section Europe
Worker clean the giant euro logo in front of the European Central Bank in Frankfurt. Photo: 6 December 2011
Image caption EU leaders will be discussing ways of fixing the euro at the two-day summit

Tougher rules to tackle the eurozone debt crisis can be achieved without changing EU treaties, European Council President Herman Van Rompuy says.

In a leaked report for a crucial EU summit beginning on Thursday, he offers a fast-track "fiscal compact" that does not need lengthy ratification by parliaments or national referendums.

Germany and France are pushing for a new EU treaty by March, saying stricter rules should be enshrined there.

The US has backed their plans.

But Treasury Secretary Timothy Geithner said the US Federal Reserve had no plans to give money to the International Monetary Fund (IMF) to boost the eurozone's bailout fund.

Mr Geithner, who is meeting all major eurozone leaders during his three-day visit of Europe, stressed that more action was needed to boost economic growth in Europe, alongside the longer-term reforms. He meets President Nicolas Sarkozy in Paris on Wednesday.

'Negative implications'

Mr Van Rompuy will be chairing the two-day summit, and all the signs are that it could be a bruising affair, the BBC's European affairs correspondent Chris Morris reports.

In the interim report, details of which have been obtained by the media, Mr Van Rompuy proposes a plan aimed at agreeing a "new fiscal compact" without holding a referendum or ratification by the parliaments of each eurozone country.

The draft says that tougher fiscal reforms can be adopted simply by amending a protocol - a procedure that needs national consensus but does not require substantial changes to the EU treaties.

This, Mr Van Rompuy argues, would speed up the implementation of reforms and remove any potential political complications.

The interim report contains the following key provisions:

  • Each eurozone member's budget deficit should be below 3% of GDP and national debt under 60%
  • A "golden rule" should be enshrined into national legislation to guarantee a balanced budget in the medium term
  • The eurozone bailout fund to be given a banking licence to borrow directly from the European Central Bank (ECB)
  • The European Commission to have the power to impose austerity measures automatically on countries which require bailouts

However, Mr Van Rompuy acknowledges that more far-reaching reforms would eventually require a change in EU treaties.

Some of the report's proposals tally with the Franco-German plan how to tackle the crisis, but some do not.

Paris and Berlin appear to be pushing through more radical measures, our correspondent says, and if all 27 EU members cannot agree, then they are prepared to work towards a new treaty involving the eurozone bloc and any other country that wants to join.

Such a move could leave Britain - a non-eurozone EU member - feeling more isolated, he says.

UK Prime Minister David Cameron has said he will not sign a new treaty without safeguards to protect the financial interests of the City of London and Britain's role in the European single market.

But such is the depth of the crisis surrounding the eurozone that the main focus is not on the EU solidarity but on restoring market confidence in whatever way proves possible, our correspondent says.

Earlier this week, Standard & Poor's put all eurozone nations on credit watch "with negative implications".

The ratings agency said the decision was prompted "by our belief that systemic stresses in the eurozone have risen in recent weeks to the extent that they now put downward pressure on the credit standing of the eurozone as a whole".

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