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2012-03-02 08:03:50
All but two of the EU's 27 leaders have signed a new treaty to enforce budget
discipline within the bloc.
The "fiscal compact" aims to prevent the 17 eurozone states running up huge
debts like those which sparked the Greek, Irish and Portuguese bailouts.
To take effect, the pact must be ratified by 12 eurozone states.
UK Prime Minister David Cameron, who with the Czechs refused to sign, said his
proposals for cutting red tape and promoting business had been ignored.
But the newly re-appointed President of the European Council, Herman Van
Rompuy, said British calls to boost the EU economy were being taken seriously
and he had sought to re-draft the summit's conclusions accordingly.
Fiscal compact
Enshrines balanced budget rule in law and foresees penalties for offenders
Driven by Germany which already has budget prudence written into its
constitutions
Rejected by UK over financial service regulations that might affect the City of
London
Q&A: EU treaty to control budgets
Critics argue that the pact is mainly a political gesture aimed at reassuring
taxpayers in Germany, the eurozone's dominant economy, where there is
reluctance to pay for further eurozone bailouts.
German Chancellor Angela Merkel described its as a "great leap", a first step
towards stability and political union.
The pact emerged after Mr Cameron vetoed plans to change the EU treaties to
enforce greater budgetary discipline back in December.
These new powers may face an early test as both Spain and the Netherlands have
admitted they will miss targets for reducing their deficits, BBC Europe editor
Gavin Hewitt reports.
While there has been a change of emphasis at this summit, "from crisis mode to
growth mode" in the words of one senior official, it will be difficult to
achieve whilst tough spending cuts are being made, Gavin Hewitt adds.
'Credibility at stake'
In a speech at the signing ceremony, Mr Van Rompuy said: "This stronger
self-constraint by each and every one of you as regards debts and deficits is
important in itself.
"It helps prevent a repetition of the sovereign debt crisis. It will thus also
reinforce trust among member states, which is politically important as well.
"The restoration of confidence in the future of the eurozone will lead to
economic growth and jobs. This is our ultimate objective."
Speaking shortly after signing the pact, the President of the European
Commission, Jose Manuel Barroso, said it was a strong political statement for
the EU.
"In the eyes of the world what is at stake is the very credibility of the euro
area and of Europe as a whole," he said.
The pact, he said, enhanced the euro's permanence "contrary to all the negative
prophecies".