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
    +1

    Comment number 138.

    125.Bill Walker
    Just now
    Have they spelt out the penalties ......

    That's a key question Bill. Will they try to impose fines? How would that help a struggling economy? If they do, will the guilty countries pay up? And if they don't, what then? In fact, nothing will happen. It's all meaningless rhetoric and will achieve nothing. Except to drive another nail in the coffin of democracy.

  • rate this
    +2

    Comment number 137.

    Dave talks, Europe listens, Delusion reigns.

  • rate this
    +3

    Comment number 136.

    "9.
    JohnSmithREAL
    56 Minutes ago

    Dont remain under the illusion that some how the German Tax payer and the British Tax payer ( via the IMF) is bailing out the Greek People...No..the Banks are getting bailed out IN...wait for it...Germany and UK"

    Err, yeah, because it's the banks money, not the Greeks!

  • rate this
    +10

    Comment number 135.

    131.GoldenLeo
    Fiscal integration is simply a step towards a federal Europe - sovereignty won't fit into the equation


    > Yes, it's going to be entertaining to see the resentments rising once these nations realise their budgets are being decided in Berlin.

  • rate this
    +7

    Comment number 134.

    The straight forward reason (which is never explained by any politician) that we have not had a referendum on EU membership is because Cameron etc know there is a big risk that the people of the UK will want out of the EU. So basically, they know there may be a majority of UK citizens wanting out, but they completely ignore this fact and press ahead with the EU regardless of what any of us think

  • rate this
    +2

    Comment number 133.

    Just another delaying tactic to help France and Germany prepare for the fall of the euro.

  • rate this
    +2

    Comment number 132.

    Rabid right wing europhobe
    So even without say they still trade....we dont get listened to anyway so whats the difference? apart that is from saving us billions and allowing us to run our own country setting our own laws on civil rights , immigration etc so saving us even more billions

  • rate this
    +2

    Comment number 131.

    I wonder how long it will be before Germany and France break these fiscal rules like they did in the early 2000s - they didn't care about the fiscal legislation which existed back then.

    Greece isn't being allowed to default due to the high amounts of investment from French and German banks.

    Fiscal integration is simply a step towards a federal Europe - sovereignty won't fit into the equation.

  • rate this
    +2

    Comment number 130.

    German domination in Euorpe again is very worrying.

    Learn from the past.

  • rate this
    0

    Comment number 129.

    All this is about making sure that those who try to follow the rules ( Britain) suffer while those who break them (everyone else) lives the life of Riley on our taxes.

    Is there anyone in their right mind who still thinks Britain should be part of this corrupt and vile Fourth Reich ?

  • rate this
    +54

    Comment number 128.

    So countries that take on too much debt will be fined 0.1% of GDP for doing so, thus taking them further into debt? you couldn't make it up.

  • rate this
    +16

    Comment number 127.

    Is this treaty anything like the fiscal agreement that constituted part of the European Union, that all the leaders stuck to right up until it suited them otherwise when they all started ignoring it. There already was legal protection against the economic situation, they just ignored it, and now we pay the price.

  • rate this
    +2

    Comment number 126.

    Didn't the Eurozone set parameters a few years ago stating the deficits should stay within 3% of GDP didn't Germany and France break that several times and wasn't Spain one of the best performers up to 2008. Do they really believe their own profoganda? well I suppose they must do as they wrote but do they think the rest us do? Aren't they already over the threshold?

  • rate this
    +1

    Comment number 125.

    Have they spelt out the penalties when countries cannot stick to the terms. Will there be a sliding scale, on the likes of Greece & Ireland = severe penalties, Italy, Spain, & Portugal = severe talking to, France and Germany = never mind, could have happened to anybody. (or should we insist on Greek or Italian technocrats to take over from Sarkozy & Merkel?

  • rate this
    +13

    Comment number 124.

    It Is quite clear that Cameron has ridden (Raina?) roughshod over Europe yet again. Why on earth should they listen to a member of the Chipping Norton set anyway? The Germans are inneficient because of their socialist labour laws?
    He really is turning into the Britain's Berlusconi.

  • rate this
    0

    Comment number 123.

    #102

    So by your logic it is quite correct that they should be unelected because nobody would bother to vote and if they did Germany would dominate?

    Very true and sums up the EU perfectly.

    Its an undemocratic Leviathan that does as it pleases. You get to pick MEP's who rubber stamp enelected commissioner orders.

    That is the truth. The EU is not a democracy in a recognisable way...

  • rate this
    +1

    Comment number 122.

    Anyone want to take bets as to how long the markets take to spot the usual smoke and mirrors trick.

    The train crash will just be a bit bigger and a bit further down the track. I'm just looking at how I can move my savings out of the UK/Sterling, I have no intention of going down with this load of jokers.

  • rate this
    +6

    Comment number 121.

    93.
    krokodil


    "Baroness Ashton and Mr Van Rompuy...

    In the EU they are top shelf and represent Europe. How can it be right that not a single person in the entire EU electorate cast a vote for them to be there? Is that democracy?"

    Milliband and co are busy organising a commons debate on democracy in Russia. Perhaps they will get round to democracy here after they have sorted Mr Putin out

  • rate this
    0

    Comment number 120.

    The sovereign debt crisis was caused by funding the fallout of the financial crisis, not by bad fiscal spending. The treaty misses the point. Also, you can't run a balanced govt budget in a monetary system where 97% of money is created as debt. You need govt's to run a deficit to have a sufficient money supply. Previous attempts at this have always caused recessions & worsened economic problems.

  • rate this
    +4

    Comment number 119.

    @JohnSmithREAL - spot on!

    From quantitative easing to bail outs, it's the banks that are getting the money. I wish governments just gave the money to the people instead! Will that happen - sadly NO.

 

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