Czech Republic joins UK in opposition of the new fiscal pact. Leaders strike compromise deal on non-Euro states’ demand to take part in eurozone events.
By Carmen Dinu in Brussels and Mihai Barbu in Bucharest
Twenty-five of the European Union’s 27 members, without the United Kingdom and Czech Republic, decided to pass the new Treaty on stability, coordination and governance in the Economic and Monetary Union. The fiscal pact provides some “golden rules” on budgetary balance and it can be implemented after it is ratified by at least 12 member states. The announcement was made by European Council president Herman Van Rompuy at the end of an extraordinary meeting of European leaders in Brussels. Talks were rather tense and heated, which was confirmed by the delays reported in press conferences scheduled to be held after the meeting. The reason for dispute was the presence of non-Euro states in discussions about the eurozone. This had been one of the key demands of Poland ever since it held the rotating presidency of the EU last year, when the country managed to impose the presence of its officials in such meetings. Poland’s main argument was that the decisions made by the 17 eurozone members influence all EU countries, not only those that are using the European single currency.
Current EU president Denmark is not a member of the eurozone either and this is why it cannot coordinate Eurogroup meetings. Warsaw’s push was backed by several Eastern European states, although Paris refuses to allow non-Euro countries have a permanent seat at the table of eurozone talks. On Monday evening, EU leaders managed to find a compromise solution, in which non-Euro-using signatories will participate at least once a year and will take part in all summits which discuss competitiveness or changes to the “architecture” of the eurozone.
According to Van Rompuy, the European fiscal pact implies commitment to tight fiscal control and introducing provisions for this control in national constitutions, along with consolidation of rules on excessive deficit procedures, by making sanctions automatic and by forwarding national draft budgets to the European Commission for approval. The fiscal pact answers the demands of German Chancellor Angela Merkel, who put forth the idea as a condition for Germany’s financial solidarity with eurozone countries in difficulty.
Under the treaty, the European Court of Justice can impose fines of up to 0.1 per cent of the country’s gross domestic product if the budget rule is not transposed correctly, according to EUObserver. The collected money will be transferred to the permanent eurozone fund – the European Stability Mechanism – which will enter into life in July, or to the general EU budget in the case of fines of non-euro-using signatories.
Czech Prime Minister Petr Necas told journalists at the summit that his country might however join the pact in future. He explained that he stayed out for three reasons: because non-euro countries will not be able to participate in all eurozone summits; because the treaty does not pay enough attention to debt; and because it would face “complicated ratification” back home.
For his part, British PM David Cameron said his government would act if the treaty threatened UK interests. He still has “legal concerns” about the use of EU institutions in enforcing the fiscal treaty, he said, according to the BBC. “They must not take measures that in any way undermine the EU single market,” he said, adding: “we’ll be watching like a hawk”. Cameron used his veto last month to opt out of the treaty, arguing that the UK needed to keep its authority over financial services in the City of London.
No new measures on Greece
European Union leaders also discussed ways to stimulate economic growth despite the stringent austerity budgets in many countries – and focused on how to reduce unemployment across the eurozone, BBC News said.
But the leaders did not propose any new measures aimed at resolving the situation in Greece, the nation at the center of the debt crisis in Europe. Van Rompuy welcomed the progress that has been made in talks between Greece and its private sector creditors, saying a deal could be reached in the coming days, CNN said.
He also called for a quick agreement on the terms of a second bailout for Greece, which is being negotiated with the EU, International Monetary Fund and European Central Bank.
According to EUObserver, Greece is seeking a deal with private lenders and the EU “by the end of the week,” in order to avoid financial meltdown.
Speaking to journalists after the summit, Greek PM Lucas Papademos said he had “more detailed discussion” with his “European friends” about the talks with private bankers and the outstanding reforms needed to secure a EUR 130 billion bail-out Greece needs to refinance its debt in March.