In brief: Provisions of the Eurozone fiscal compact and economic issues

At the European Council meeting of 9 December 2011, all EU Member States with the exception of the UK agreed to participate in a ‘fiscal compact’ to increase budgetary discipline in the eurozone, enshrined in a new Treaty on Stability, Co-ordination and Governance in the Economic and Monetary Union. The principal change made by the Treaty is that eurozone members must in general keep their structural budget deficit below 0.5% GDP, as well as adhering to existing rules on debt (no more than 60% GDP) and general deficits (no more than 3% GDP).

Although a number of commentators have written in support of the compact, not everyone agrees: some see the compact as a misguided response that fails to address the root causes of the eurozone crisis.