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
    0

    Comment number 198.

    I think Cameron may be a potential solution to our energy needs, man that guy can't half kick out some hot air.

  • rate this
    +3

    Comment number 197.

    The EU is broken.

    Yes it does good, but at what cost? Send all the MEP's, assistants, Commisionars, hangers on, etc home. Save us some money, burn the place down and sell off the land.

    It awlays tinkered with via compromise and what is the end resault? A treaty signed then stright away gov are saying that it will be broken by them.

    What a waste of time and money

  • rate this
    +1

    Comment number 196.

    As long as the ECB can go on printing money and lending it to the banks at a knockdown price, do these fiscal restraints really mean anything?

    Barclays has borrowed 8.2 billion euros from the ECB. What For? Apparently so that it can lend more money to Spain and Greece at a higher rate than it borrowed it from the ECB. Madness

  • rate this
    +14

    Comment number 195.

    I'm confused!

    Firstly David Cameron told us that Britain would not be sidelined by his decision a few months ago not to go along with the rest of the EU and Britain would still have a active "voice" within Europe.

    Now he is complaining that his views have er, um, been sidelined...

  • Comment number 194.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
    +3

    Comment number 193.

    This is a political treaty which has a massive fiscal impact on the participants. One is always mindful of signing up to something that will restrict one's freedom of action in the future, but that's exactly what's happening here. What we have here, if this rule is obeyed, is the planting of the seeds of implosion of the Eurozone sometime in the future. Good luck.

  • rate this
    -1

    Comment number 192.

    161. russellhorwood
    "What makes me laugh is the idea of financial penalties for not sticking to financial guidelines"

    Sure. There should be an incentice bonus for the worst ruled countries. That would stir a virtuous competition to financial discipline.

  • rate this
    +2

    Comment number 191.

    173.Old_Hat

    Banks bought Greek debt in good faith that their government would use it to invest in economic growth . However, they squandered their financing on excessive public services, failed to grow their economy and failed to overhaul their tax infrastructure.
    ++
    Indeed, but the Greeks didn't borrow it all in one go.
    The squandering didn't put the brakes on the lending.

  • rate this
    0

    Comment number 190.

    @150 thelevellers
    The rest of Europe marching forward? Hurrah for them, the Logical European Marching Members Ignoring National Government Strictures (LEMMINGS for short) marching resolutely forward to the cliff edge. Luckily there are always a few left, like us, who say "I'll sit this one out", otherwise there would be none left (until the next Labour government)

  • rate this
    0

    Comment number 189.

    meh, nothing is set in stone yet, the Irish need a referendum, the french need to push it through thier parliment as do several other countries.

    So until that happens this can still be ripped up.

  • rate this
    0

    Comment number 188.

    How many people here also know that they broke their own rules when they bailed out the first nation? That was explicitly against the original laws. Yet they ignored it.
    Once again, we all continue to live under an unknown system described as "capitalism" when it isn't. This is a corporatocracy, and Europe is now the personal property of the largest banking cartels on the planet.

  • rate this
    +2

    Comment number 187.

    Well I watched Cameron trying to make a silk purse out of a sow's ear. As my grandmother used to say of blowhards "fur coat and no knickers". His and by extension the UKs ability to effectively participate in EU economic policy decisions is draining away by the week.

  • rate this
    +3

    Comment number 186.

    Let the Eurozone get on with it, the UK didn't sign up to the Euro yet persists in sniping & stirring up trouble from the sidelines. Yes it's a big problem but are the Zone going to take advice from Flashman? I think not, in fact who would when one considers his track record on being right about anything plus his promise breaking record is truly impressive but for all the wrong reasons.

  • rate this
    +3

    Comment number 185.

    #167 Ireland won't vote NO.... they will rig it like last time...

    Anyway. The EU is a joke. Its people do not have a say. All the commissioners are unelected! They run the show.

    I do not recognise the EU as a concept I am part of. Its not all bad I know but I have no loyalty to the EU as an institution and will not until I get a vote and the UK can make its choice.

  • rate this
    +1

    Comment number 184.

    145.
    DynamicEntrance


    ". Come back when you're not ruled over by an unelected Queen, prince and lords, maybe then the rest of the world will take you seriously."

    May I suggest you make a dynamic re entry once you have familiarised yourself with our imperfect but workable system of govt so that you might be taken seriously? Such progress, moments ago you spoke for Europe now its the World.

  • rate this
    0

    Comment number 183.

    "CJH58
    so even as the ink is wet on the page from signing Spain already want to negotiate a special deal!"

    They need to learn from Ireland and hold a referendum. That way a No or threat of a No can be bought off with concessions that are possible with some sates but not one the size of the UK.

  • rate this
    0

    Comment number 182.

    160. Rabid Right Wing Europhobe; Seeing as the UK is NET importer of goods from the EU, your comment is rather misleading. Are you not aware of 'tit for tat'?
    The biggest loser by volume of trade in any tariffs or trade surcharges would be the EU or more correctly those EU lands which have a trade surplus with the UK. In addition,

  • rate this
    +3

    Comment number 181.

    Mr Cameron, I am glad that from your perspective "We have made our voice heard".

    When will you allow us to have our voice heard and grant us a Referendum on this club of fools aka the EU?

  • rate this
    -30

    Comment number 180.

    A first small step towards recovery.

  • rate this
    +4

    Comment number 179.

    "There are two ways to conquer and enslave a nation. One is by the sword.. The other is by debt." - John Adams 1826

 

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