EU leaders agree ‘limited’ changes to treaty to solve debt crisis

Basescu insists that European banks’ recapitalisation must not be done by pulling out money from the Romanian market.

BRUSSELS – Europe’s leaders have agreed to change the EU treaty if necessary to help resolve the eurozone’s debt crisis and stop the region sinking into recession, the BBC said. EU president Herman Van Rompuy said after a day of emergency talks in Brussels on Sunday that members would “explore the possibility of limited change”. On Sunday morning the leaders of all the European Union’s 27 members held talks about the Greek debt crisis, recapitalising banks, and bolstering the bailout fund. This was followed in the afternoon by a separate meeting of the 17 nations that use the euro.

Speaking after the meeting, Van Rompuy said that altering the treaty was under discussion. Although no proposed details were given, any change is likely to involve closer fiscal and economic cooperation. “The aim is deepening our economic convergence and strengthening economic discipline,” Van Rompuy said. He said the words ‘limited change’ meant “not a general overhaul of the institutional architecture. We also said that we would need the agreement of all the 27 (member states) before we can decide on a treaty change. “The most important thing is not to change the treaty, the most important thing is to strengthen economic convergence,” he said.

British Prime Minister David Cameron said that he had secured safeguards to ensure that Britain’s national interest would be protected in case of any treaty changes. But he got into a spat with the French president, Nicolas Sarkozy, who told Cameron: “We are sick of you criticising us and telling us what to do.”

In turn, German Chancellor Angela Merkel said her country wants such treaty changes to beef up the disciplinary procedures governing eurozone countries and to ensure that they retain their domestic finances within sharply prescribed criteria, EurActiv said. A report on how to proceed with the “limited changes” will be prepared in view of the December meeting of EU heads of states and governments.

Although the weekend summit of eurozone leaders was rather inconclusive, the outline of a deal was agreed, with a summit to finalise details set for Wednesday. The emergency summit will see all 27 EU government heads gather, whereas originally it was intended that only the 17 eurozone governments would meet, the BBC said.

Over the weekend, eurozone leaders agreed to force banks to protect themselves against future losses, and to increase the firepower of the single currency’s bailout fund.

Under the deal, European banks must raise more than EUR 100 bln in new capital to shield them against possible losses to indebted countries. Moreover, it was decided that the European Financial Stability Facility (EFSF) – the single currency’s EUR 440 bln-bailout fund – will be given more firepower, although it is not as yet clear how this will be achieved. And lenders to Greece will be asked to agree to much deeper losses than the 21% write-off currently on the table.

Italy also came under pressure to do more to stabilise its finances. Merkel said she had had a “conversation among friends” with her Italian counterpart, Silvio Berlusconi.

Cotroceni talks

Meanwhile, President Traian Basescu held a meeting with several cabinet ministers at Cotroceni Palace yesterday morning, according to Mediafax. The meeting was attended by Prime Minister Emil Boc, National Bank governor Mugur Isarescu and several ministers who hold economy-related portfolios, such as Gheorghe Ialomitianu (finance), Leonard Orban (European affairs), Ion Ariton (economy), Elena Udrea (regional development and tourism), Anca Boagiu (transport), Sulfina Barbu (labour), Valeriu Tabara (agriculture) and Laszlo Borbely (environment). After the talks, presidential spokesperson Valeriu Turcan told Mediafax that the meeting focused on economic issues, in the context of most recent international developments.

PM Boc also told the news agency that the most important message after the meeting is “maximum caution in an extremely difficult international context which unfortunately also affects Romania.” Boc explained that the talks focused on the internal and international economic prospects, based on the European Council summit’s conclusions, on EU fund absorption and the visit of the IMF delegation to Romania, which is due to begin today.

When asked whether Boc’s message of caution meant a freeze in pensions, Labour Minister Barbu did not provide a clear answer, saying that the situation is currently being analysed so as to establish whether next year’s budget will allow an increase in pensions according to the inflation rate.

The meeting was called by Basescu to discuss the European Council’s summit conclusions and in particular a bank recapitalisation plan which the president says could be risks for Romania if not done properly.

In press statements in Brussels on Sunday evening, the president warned that the bank recapitalisation programme must take into account eurozone banks’ level of exposure on the Romanian market.

“We cannot accept recapitalisation by which the necessary amounts would be gathered by pulling out money from the Romanian market, for instance, in order to put up with eurozone crises. Delays in decisions have already caused us severe problems in what regards financing deficits and debts for this year. We ended up borrowing at higher costs, higher interest rates than in 2010, when Romania was not macro-economically stabilised. And this is because the entire region’s CDS (credit default swap) was depreciated, because measures on Greece were not taken in time,” the president said.

Basescu also said that on Wednesday he will be back in Brussels to attend EU leaders talks ahead of the eurozone’s meeting. The president added that today, he will have a meeting with European Commission chief Jose Manuel Barroso to discuss the use of European funds as the commission in June suspended payments under the second component of the Regional Operational Programme, after finding irregularities with four contracts.

Basescu calls for Schengen compromise by December

President Traian Basescu also said on Sunday evening in Brussels that if a compromise solution is not found on Romania’s and Bulgaria’s Schengen accession until the end of the year, the European Council will include the matter on its agenda.

Basescu explained that at Sunday’s council meeting, he brought up the issue of The Netherlands and Finland failing to respect a political commitment. “There are two major obligations that EU states have: to meet all technical criteria to join Schengen and to meet all technical criteria in order to join the eurozone. Romania has met this obligation. The Netherlands and Finland refused to apply the (accession) treaty,” Basescu said.

Following opposition from Dutch and Finnish governments, Romania’s and Bulgaria’s accession to Schengen was put off indefinitely last month. “I can tell you that European Council president (Herman) Van Rompuy warned that if a compromise formula is not found by December, a compromise that should overlap the compromise reached with France and Germany, he will include [the topic] on the Council’s agenda,” Basescu added.

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