BRUSSELS: European Union leaders, excepting Britain, banded together Friday to back tighter budget policing after a heated summit considered a last chance to save the debt-struck eurozone.
After two years of foot-dragging on deepening integration, 26 of the 27 EU states signalled their willingness to join a “new fiscal compact” to resolve the two-year crisis threatening to crack apart the monetary union.
But the deal came with a heavy political price when non-euro Britain resisted a Franco-German drive to enshrine new budget rules in a modified EU treaty to carve them into stone.
“The British were already not in the euro and in that respect, we are used to this situation,” German Chancellor Angela Merkel said as talks resumed Friday after a first 10-hour session winding up at 5:00 am.
Merkel said she was “very pleased” most had agreed the “fiscal compact”that plans to impose near automatic sanctions on debt and deficit delinquents.
“We have learned from the mistakes of the past,” she said. The 17 eurozone nations signed up to the pact while nine other EU nations, “indicated the possibility to take part in this process” after consulting their parliaments, EU leaders said in a statement.
Hungary had originally voiced reluctance, while Sweden and the Czech Republic were undecided. The new deal, to be adopted by March, was put to the entire 27-nation bloc in the interests of maintaining unity.
The accord, which is to include automatic sanctions that can only be blocked by a majority of powerful states, aims to end past practices of overspending responsible for the two-year debt crisis ravaging Europe.
Some leaders hope this will spur the European Central Bank to step up its role in the crisis after ECB president Mario Draghi had called for a “new fiscal compact” last week.
Draghi dubbed the summit decisions a “very good outcome” for the eurozone. But a day earlier he sent markets into a tailspin by saying that the ECB's purchase of troubled sovereign bonds was “limited” and “temporary”.
Asian markets dropped as investors nervously awaited the final outcome of the marathon summit. Tokyo closed down 1.48 pe rcent and Hong Kong slumped 2.73 per cent.
Europe's main stock markets fell at the start of trading before rising later in the day in volatile trading. French President Nicolas Sarkozy said British Prime Minister David Cameron's bid to halt ongoing EU efforts to curb the City of London's huge financial services sector was “unacceptable”.
“Where we can't be given safeguards, it is better to be on the outside,”retorted Cameron. A square mile in central London is home to 75 per cent of Europe's entire financial services industry, but the British government is resisting French and German moves to impose a financial transactions tax, as well as new regulations controlling trading.
Sarkozy said: “In order to accept treaty revision among the 27 EU states, David Cameron asked us, something we all judged unacceptable, for a protocol to be inserted into the treaty granting the United Kingdom a certain number of exemptions on financial services regulations.
“We could not accept this, since we consider, quite on the contrary, that a part of the world's woes stem from the deregulation of the financial sector.
While the leaders split over treaty changes, they pledged to pump 200 billion euros ($267 billion) into IMF coffers to help the eurozone, which is struggling to boost its own rescue fund to one trillion euros.
Sarkozy also said the ECB would act as an agent for the bailout fund, the European Financial Stability Facility (EFSF).
The EFSF's successor, the European Stability Mechanism (ESM), will come into force earlier than first mooted in July 2012, with a lending capacity of 500 billion euros.
Herman Van Rompuy, the EU's president, said a German-led drive to impose private-sector losses on Greek bondholders had been a one-off deal that would not be repeated.
This policy, which he admitted had had “a very negative effect on the debt markets” was “officially over”, he declared. But Germany won other battles, notably when EU leaders dropped the idea of pooling debt by issuing joint eurozone bonds.
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