| Series Title | EurActiv |
|---|---|
| Series Details | 9.12.11 |
| Publication Date | 09/12/2011 |
| Content Type | News |
|
seem also Eurozone countries sign-up to closer ties Leaders of the European Union’s 27 countries failed to agree to change the EU’s treaties in order to impose tighter fiscal rules on the eurozone and instead chose to create a new intergovernmental treaty which will probably have less teeth and be negotiated only among 23 members. Despite the division – which will leave Britain out of the new pact, with the Czech Republic, Hungary and Sweden still weighing participation – Mario Draghi, the European Central Bank president, signalled his approval, a key vote of confidence that could allow the ECB to move more aggressively in eurozone bond markets. “It’s going to be the basis for a good fiscal compact and more discipline in economic policy in the euro area members,” Mr Draghi said after nearly 10 hours of meetings that finally broke up at 5am local time. Still, without agreement among all 27 countries, it remained unclear how the new fiscal rules the summit leaders promised to follow would be enforced. EU institutions – most importantly, the European Commission, which oversees and passes judgment on such rules in Brussels – legally cannot have a formal role in any agreement outside the EU treaties. José Manuel Barroso, the Commission President, said he believed there were ways to work around such legal prohibitions, but senior EU officials acknowledged it would be difficult to give Brussels new powers over eurozone national budgets outside the EU treaties, and diplomats expressed concern financial markets would not see the new pact as credible. In the end, diplomats said, it was the UK that became the biggest stumbling block to a deal between all 27 countries, with Britain’s prime minister David Cameron holding out for hours in the hope of getting concessions for the UK’s financial services industry. “Very simply, in order to accept the reform of the treaty at 27, David Cameron asked for what we thought was unacceptable: a protocol to exonerate the UK from financial services regulation,” said Nicolas Sarkozy, the French president. “We could not accept this as at least part of the problems [Europe is facing] came from this sector.” Several diplomats said Mr Cameron emerged from Friday morning’s negotiations deeply wounded, angering fellow EU leaders and getting no trade-offs for British interests. “This is going to cost the UK dearly,” said one senior EU official. “They have antagonised everyone.” Mr Cameron defended his hard-line stance in a hastily-called news conference following the summit, and insisted that he had not ruptured relationships with his counterparts. “I had to pursue very doggedly what was in British national interest,” Mr Cameron said. “It is sometimes the right thing to say, ‘I cannot do that, it is not in our national interest, I don’t want to put that in front of my parliament because I don’t think I can recommend it with a clear conscience, so I am going to say no and exercise my veto’.” Herman Van Rompuy, the European Council president, sought to highlight new short-term efforts agreed on Thursday night – the first evening of the two-day summit – including €200bn in new EU funding for the International Monetary Fund, which will come from eurozone countries and some non-euro members, including the UK. The cash is expected to go into a new IMF fund to help countries struggling to deal with the growing liquidity freeze. EU leaders are expected to seek contributions from other countries outside Europe, and Christine Lagarde, the IMF managing director, said the money would be used to support the Fund’s “global membership” – a key requirement for the UK, which does not want the aid specifically targeted to the eurozone. “These resources will enhance the IMF’s capacity to fulfil its systemic responsibilities in support of its global membership,” Ms Lagarde said in a statement. But other short-term measures that Mr Van Rompuy had proposed ahead of the summit – including running two eurozone bail-out funds in tandem to increase EU rescue resources, and giving the eurozone’s new €500bn rescue facility access to ECB funding – were either rejected or set aside for later debates. As expected, EU leaders also decided to excise language in the rules governing the new rescue fund, called the European Stability Mechanism, that would have required bondholder losses in eurozone countries deemed insolvent. “Our first approach to [bondholders]…is now officially over,” Mr Van Rompuy said. The ESM, which originally was to come into force in mid-2013, will now begin operation in July, officials said. The text of the new intergovernmental treaty is expected to be completed by March, with complex national ratifications to follow. Mr Sarkozy said that while the intergovernmental treaty amounted to a “lighter” reform, it could also be quicker. Full-bore EU treaty change can take years, and Mr Van Rompuy said the new treaty could be completed much more quickly. Copyright The Financial Times Limited 2011. Eurozone deal leaves Britain isolated European leaders are struggling to cope with a profound split over crisis plans for the eurozone, leaving the UK isolated as the rest of the European Union agrees to press ahead with new fiscal rules to balance budgets. The measures are designed to restore confidence after a two-year crisis that has stalled growth in the world’s biggest economic bloc. They propose “automatic consequences” for countries whose public deficit exceeds 3 per cent of gross domestic product and cap countries’ structural deficits at 0.5 per cent. The tighter rules will be enshrined in national constitutions. The 17 countries of the eurozone signed up to the new agreement after all-night talks, with nine other countries including Denmark, Sweden and Hungary agreeing to consider joining after considering their national parliaments. Britain’s refusal to agree to a full treaty change for all 27 EU members unless there were safeguards for the UK’s financial services industry caused a standoff in the early hours of Friday morning with David Cameron, UK prime minister, Angela Merkel, German chancellor, and Nicolas Sarkozy, French president. “I really don’t believe David Cameron was ever with us at the table,” Ms Merkel said. “We’re very pleased with the result. Yesterday was no weak compromise for the euro.” “We wish them well,” Mr Cameron said. “My judgment was that what was on offer just wasn’t good enough for Britain. It’s better to allow those countries to do their own thing on their own.” Despite the UK’s refusal to sign up to the new agreement, Mario Draghi, the European Central Bank president, signalled his approval, a key vote of confidence that could allow the ECB to move more aggressively in eurozone bond markets. “It’s going to be the basis for a good fiscal compact and more discipline in economic policy in the euro area members,” Mr Draghi said. But José Manuel Barroso, the Commission president, said he believed there were ways to work round the deal’s legal difficulties. Senior EU officials acknowledged it would be difficult to give Brussels new powers over eurozone national budgets outside the EU treaties, and diplomats expressed concern financial markets would not see the new pact as credible. Several diplomats said Mr Cameron emerged from Friday morning’s negotiations deeply wounded, angering fellow EU leaders and getting no trade-offs for British interests. Mr Cameron held out for hours, diplomats said, in the hope of getting concessions for London’s financial services industry. “Very simply, in order to accept the reform of the treaty at 27, David Cameron asked for what we thought was unacceptable: a protocol to exonerate the UK from financial services regulation,” said Mr Sarkozy. “We could not accept this as at least part of the problems [Europe is facing] came from this sector.” Mr Cameron insisted that he had not ruptured relationships with his counterparts. “I had to pursue very doggedly what was in British national interest,” he said. “It is sometimes the right thing to say, ‘I cannot do that, it is not in our national interest, I don’t want to put that in front of my parliament because I don’t think I can recommend it with a clear conscience, so I am going to say no and exercise my veto’.” The decision to contribute €200bn of new EU funding to the International Monetary Fund, which will come from eurozone countries and some non-euro members, including the UK, was welcomed by Christine Lagarde, its managing director. The cash is expected to go into a new IMF fund to help countries struggling to deal with the growing liquidity freeze. “The decisions taken today by European leaders at their summit meeting are an important contribution to helping address the crisis facing the eurozone and strengthening the global economic recovery.“ EU leaders are expected to seek contributions from other countries outside Europe. Ms Lagarde said the money would be used to support the IMF’s “global membership” – a key requirement for the UK, which does not want the aid specifically targeted to the eurozone. “These resources will enhance the IMF’s capacity to fulfil its systemic responsibilities in support of its global membership,” Ms Lagarde said in a statement. But other short-term measures that Herman Van Rompuy, president of the European Council, had proposed ahead of the summit – including running two eurozone bail-out funds in tandem to increase EU rescue resources, and giving the eurozone’s new €500bn rescue facility access to ECB funding – were either rejected or set aside for later debates. The leaders said the new treaty would be signed by March. Markets reacted with uncertainty to the agreement. The S&P 500 opened higher in New York and the FTSE Eurofirst 300 turned a 0.9 per cent fall into a 0.4 per cent gain. The euro was flat against the dollar at $1.3340. Yields on Italian 10-year bonds rose 10 basis points to 6.56 per cent, climbing back towards the 7 per cent level at which other countries in the single currency have found their debt payments unsustainable. Agreement highlights •17 eurozone and 6 non-eurozone countries to take part, 3 others consider. UK stays outside. • Treaty will enshrine new fiscal compact Fiscal compact • European Court of Justice to ensure that national fiscal rules comply • Automatic fines for governments that breach 3 per cent deficit limit, unless qualified majority decides otherwise Firewall • European Stability Mechanism, the new €500bn fund, to come into effect from July 2012 • No agreement to run the two funds simultaneously which would have increased total firepower, but this will be reviewed in March • Eurozone and other EU countries to lend €200bn to the International Monetary Fund via their central banks Contagion • The ESM will be able to make bail-out decisions according to an 85 per cent majority, if Commission and European Central Bank conclude a decision is urgent. Copyright The Financial Times Limited 2011. An agreement to tighten fiscal discipline in the wider EU-27 proved impossible after UK Prime Minister David Cameron had made 'unacceptable demands' to exempt the United Kingdom from regulations, according to French President Nicolas Sarkozy. Diplomats expressed concern financial markets would not see the new pact as credible. By the end of the 9 December 2011 it looked as all EU Member States except for the United Kingdom would seek to sign up to a new treaty, although some might need to conduct a referendum. |
|
| Source Link | http://www.euractiv.com/euro-finance/cameron-corner-eu-strikes-euro-treaty-deal-news-509574 |
| Related Links |
|
| Subject Categories | Economic and Financial Affairs, Politics and International Relations |
| Countries / Regions | Europe, United Kingdom |
