EU summit: All but two leaders sign fiscal treaty

 

UK PM David Cameron: "We have made our voice heard"

All but two of the EU's 27 leaders have signed a new treaty to enforce budget discipline within the bloc.

The "fiscal compact" aims to prevent the 17 eurozone states running up huge debts like those which sparked the Greek, Irish and Portuguese bailouts.

To take effect, the pact must be ratified by 12 eurozone states.

UK Prime Minister David Cameron, who with the Czechs refused to sign, said the summit had accepted his ideas for cutting red tape and boosting growth.

On Thursday he had complained that his ideas, contained in a joint letter signed by 12 EU leaders, were being ignored.

But after the talks he said "our letter really did become the agenda for this meeting... We now have a plan that we must stick to in the months ahead".

The newly reappointed President of the European Council, Herman Van Rompuy, said the British proposals were being taken seriously and he had sought to redraft the summit's conclusions accordingly.

Fiscal compact

  • Enshrines balanced budget rule in law and foresees penalties for offenders
  • Driven by Germany, which already has budget prudence written into its constitution
  • Rejected by UK over financial service regulations that might affect the City of London

Critics argue that the fiscal treaty is mainly a political gesture aimed at reassuring taxpayers in Germany, the eurozone's dominant economy, where there is reluctance to pay for further eurozone bailouts.

German Chancellor Angela Merkel described it as a "great leap", a first step towards stability and political union.

Germany is reluctant to increase the size of the permanent rescue fund, the European Stability Mechanism (ESM), which comes into force on 1 July.

The leaders put off until the end of March a decision on its size. There are calls to combine the 250bn euros (£209bn; $333bn) left in the temporary bailout fund - the EFSF - with the 500bn-euro ESM.

More budget pain

The fiscal pact emerged at an EU summit in December, where Mr Cameron vetoed plans to change the EU treaties so that greater budget surveillance would be enforced.

Start Quote

There is a new and unexpected mood coursing through Europe's corridors - it is optimism”

End Quote Gavin Hewitt BBC Europe editor

The pact may face an early test as both Spain and the Netherlands have admitted they will miss targets for reducing their deficits, BBC Europe editor Gavin Hewitt reports.

Spain, already struggling with painful public sector cuts, wants to negotiate a higher deficit target with the EU. But Brussels made no concessions on Friday.

While there was a change of emphasis at this summit, "from crisis mode to growth mode" in the words of one senior official, growth will be difficult to achieve whilst tough spending cuts are being made, Gavin Hewitt adds.

Whereas in the past even France and Germany broke the EU's deficit rules the new treaty is aimed at preventing such practices.

Eurozone countries will scrutinise each other's budgets and the European Court of Justice will be able to check whether nations stick to the rules. It will fine them up to 0.1% of national GDP if they fail to do so.

'Credibility at stake'

In a speech at the signing ceremony, Mr Van Rompuy said: "This stronger self-constraint by each and every one of you as regards debts and deficits is important in itself.

"It helps prevent a repetition of the sovereign debt crisis. It will thus also reinforce trust among member states, which is politically important as well.

German Chancellor Angela Merkel: A ''very important'' moment

"The restoration of confidence in the future of the eurozone will lead to economic growth and jobs. This is our ultimate objective."

The President of the European Commission, Jose Manuel Barroso, called the pact a strong political statement for the EU.

"In the eyes of the world what is at stake is the very credibility of the euro area and of Europe as a whole," he said.

The pact, he said, enhanced the euro's permanence "contrary to all the negative prophecies".

Irish vote

The fiscal compact will now go before national parliaments and, in the case of the Irish Republic, a referendum.

Ireland rejected the Lisbon Treaty in a referendum in 2008, before approving it a year later after obtaining EU concessions, but the success of this fiscal treaty is unlikely to depend on Irish voters.

Irish businessman Declan Ganley, a leading "No" campaigner in 2008, has said he may support the fiscal compact if Brussels offers Dublin better terms in bailing out its banks.

The chances of a "Yes" vote were around 50-50, he was quoted as saying by Reuters news agency.

While the compact only needs to be ratified by 12 of the eurozone states to take effect, any state which fails to back it will lose the right to future bailouts.

An international bailout worth about 85bn euros ($113bn; £72bn) was granted to Dublin in November 2010.

 

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  • rate this
    +2

    Comment number 78.

    63.
    Beefcake


    "Just an EU president, and EU Finance minister, an elected parliament and now an agreement to oversee each other's spending. Sounds like that should do it!"


    You had better tell Mrs Merkel , she is asking for political union so from what you say she must obviously be unaware that the EU has a federal govt already.

  • rate this
    +2

    Comment number 77.

    @60. Mysticalnubnub

    How very clueless you and your ilk are! Can't you see that the problems we have would be tackled in the same way if your dearly beloved Labour were in power? Regardless of what they claim, they would do the same as the coalition.

    Just like it doesn't matter which party is in power in Greece, they still need to take the same actions, regardless of their rhetoric!

    Clueless!

  • rate this
    +40

    Comment number 76.

    Currency union exists in the US and UK. People in these countries accept fiscal transfer from better to less well off areas because they are single nations. In the EU this is not the case. Germany will not pay for the economies of southern Europe, and the southern Europeans resent being told what to do by the Germans. The only reason this carries on is because it is wholly undemocratic!

  • rate this
    +9

    Comment number 75.

    As David Cameron didn't sign the treaty, why should he expect the EU leaders who signed the treaty to listen to him?

  • rate this
    +4

    Comment number 74.

    The Euro will never work. For proof look at America, where a single currency encompasses numerous economic vehicles(States) all with local tax raising powers, yet 10-12 of those States are now officially insolvent/bankrupt.

  • rate this
    +4

    Comment number 73.

    Lets not forget that none of these politicians, the IMF, the World Bank etc saw any of this on the horizon to begin with, even while millions of other people around the world did. Why was the coming collapse so evidently clear to so many of us, yet not to people who's careers have revolved around global finance? They are all corrupt, stupid, or both. This is not as it all seems, not at all.

  • rate this
    +3

    Comment number 72.

    44.Beefcake
    Is th U.S. Dollar bound to fail as it covers 50 states with vastly different economies (New York, Texas, Alaska, Hawaii, Nebraska, California), each with their own federal taxes and budgets?

    The US dollar was founded on a shared responsibility for the deficits of certain states, which is exactly what Germany and France will not agree to. Unless they do, the Euro will fail.

  • rate this
    0

    Comment number 71.

    #61. HaveIGoThatWrong

    Completely and absolutely incorrect.

  • rate this
    0

    Comment number 70.

    @61.HaveIGotThatWrong
    "1957 : European Economic Community - EEC
    1992 : European Community - EC
    2007 : European Union - EU
    2012 : Confederation Of German States"

    Ba-da-Boom! Ha, ha! Are you available for children's parties?

  • rate this
    0

    Comment number 69.

    @56 ATNotts

    Let's extend your analogy. Are you saying that it is sensible for a day member of the golf club to take an enormously unwise economic decision (second mortgage on their house, say, to afford the annual fees), and become an annual member, in the hope that in future they'll possibly have some input ?

    The possibility of having a say isn't enough for me !

  • rate this
    +1

    Comment number 68.

    56. ATNotts; If we are as you say 'a day member' then we should be only invoiced for 'day fees'! The fact is the EU and national governments have no idea how to create jobs, wealth or prosperity, indeed it is the regulations and red tape imposed by the EU that have destroyed European competitiveness. On another note, Von Rompoy selected again! What a joke to call this organisation 'democratic'.

  • rate this
    +2

    Comment number 67.

    The UK should just leave the EU and be done with it.

    The EU is an undemocratic debt zone.

    When was the last time you got to elect a commissioner or vote on EU treaties???

  • rate this
    +2

    Comment number 66.

    @46.Peter_Sym

    If Cameron has such good ideas for boosting growth and cutting red tape why isn't the UK economy booming as a result of being freed of red tape?
    -------------

    Because our membership of the EU will not allow us to run our own ship Peter. Brussels law overrides British law.

  • rate this
    -5

    Comment number 65.

    "61. HaveIGotThatWrong "

    Yes you have.

  • rate this
    -9

    Comment number 64.

    Cameron is pathetic, and transparently pathetic at that. The reason he refused to sign this pact is because there is a new treaty to be signed later this month and he wants to gauge public reaction before deciding whether to sign or not. Refusing to sign the treaty would require political courage, because it will actually mean something, unlike this week's bit of paper.

  • rate this
    0

    Comment number 63.

    55. roaminoff

    Of course all the states you mention do ultimately come under Federal govt , unlike , for the moment, the members of the EU .

    So now the problem isn't that there are differing economies, it's that there's no EU federal gov't?

    Just an EU president, and EU Finance minister, an elected parliament and now an agreement to oversee each other's spending. Sounds like that should do it!

  • rate this
    +2

    Comment number 62.

    "'If Cameron has such good ideas for boosting growth and cutting red tape why isn't the UK economy booming as a result of being freed of red tape?"

    Because at least some of the red tape is that imposed by the EU. So we have to comply with it whilst it exists.

  • rate this
    +2

    Comment number 61.

    1957 : European Economic Community - EEC
    1992 : European Community - EC
    2007 : European Union - EU
    2012 : Confederation Of German States

  • rate this
    -10

    Comment number 60.

    It's good that they aren't listening to Cameron, he is a terribly leader that seeks to polarize, making the rich richer and the poor poorer.

  • rate this
    +2

    Comment number 59.

    What I love about this 'fiscal pact' is that the provisions are just a repetition of a document that has already been signed. The Maastricht treaty already obliges states not to exceed 3% GDP in debt. All this does is wrap up strong anti-debt rules in a political take over by the Germans which is what the whole fiasco is truly about.

 

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