British withdrawal shadows accord to fight euro crisis
BRUSSELS - The Associated Press
Britain’s Prime Minister Cameron (R) looks at Germany’s Merkel (L) at a European Union summit in Brussels yesterday. Britain says it will never join the eurozone. REUTERS photoThe European Union’s president said Friday that 26 of its 27 member countries are open to joining a new treaty tying their finances together to solve the euro crisis.
Only Britain remains opposed, creating a deep rift in the union.
In marathon overnight talks, the 17 countries that use the euro gradually persuaded the others to consider joining the new treaty they would create. Some of those countries may face parliamentary opposition to the treaty, which would allow for unprecedented oversight of national budgets.
“Except for one, all are considering participation,” EU President Herman Van Rompuy told reporters.
A document released near the end of a high-stakes EU summit on Dec. 13 said the leaders of nine of the 10 EU countries that don’t use the euro “indicated the possibility to take part in this process after consulting their parliaments where appropriate.”
Darghi happy with deal
In drafting a new treaty, the countries hope to help European nations struggling with giant debts over the long term, and in that sense there were early indications of success. Such an agreement is considered necessary before the European Central Bank and other institutions commit more money to lowering the borrowing costs of heavily indebted countries like Italy and Spain.
“It’s a very good outcome for the euro area, very good,” ECB President Mario Draghi said in Brussels. “It is going to be the basis for much more disciplined economic policy for euro-area members. And certainly it is going to be helpful in the present situation.”
Stocks and the euro climbed on the news of the new treaty, even though it offers only a long-term solution and no immediate salve for a crisis that started in Greece, then plunged the whole eurozone into crisis and now threatens the global economy.
While the deal could help save the euro, the political implications of the rift could be enormous.
Germany and France had hoped to persuade all 27 EU countries to agree to change the treaty that governs their union. But Britain, which doesn’t use the euro, firmly said no.
Britain’s leaders argued that the revised treaty would threaten their national sovereignty and damage London’s esteemed financial services industry. Germany and France, the eurozone’s biggest economies, made clear that a deal among the 17 euro countries and whoever else wanted to join was better than nothing.
Hungary, the Czech Republic and Sweden said they would need to consult their parliaments, while the other six countries outside the eurozone -Denmark, Poland, Bulgaria, Romania, Latvia, Lithuania- agreed they wanted to join.
“The principle of a strong commitment to a new ‘fiscal compact’ -tough discipline and sanctions in case rules are breached - and stronger coordination of economic policies has been established,” said Herve Goulletquer, an analyst at Credit Agricole. “This is a significant step forward. What markets want now is to be sure that it will work. The devil is too often in the detail.”
In Europe, Germany’s DAX was up 0.8 percent at 5,922 while the CAC-40 in France rose 1.2 percent to 3,133. The FTSE 100 index of leading British shares was 0.2 percent higher at 5,496. The euro was also flat at $1.3354.
Wall Street was poised for gains at the opening sesssion.
“An all-mighty sell-off in the markets is brewing,” said Nicholas Spiro of Spiro Sovereign Strategy. “EU leaders have patently failed to deal with the issue that investors care most about: shoring up eurozone sovereign debt.”
EUROZONE FISCAL COMPACT
The outlines of the measures agreed by 17 eurozone members are:
1 A cap of 0.5 percent of GDP on countries’
annual structural deficits
2 “Automatic consequences” for countries whose
public deficit exceeds 3 percent of GDP
3 Tighter rules to be enshrined in countries’ constitutions
4 European Stability Mechanism (ESM) to be
accelerated and brought into force in July 2012
5 Adequacy of 500 billion euro ($666 billion)
limit for ESM to be reassessed
6 Eurozone and other EU countries to provide
up to 200 billion euros to the IMF to help
debt-stricken eurozone members
7 ESM and the European Financial Stability Facility (EFSF) to managed by the European Central Bank