Euro states sign fiscal compact
BRUSSELS - The Associated Press
European Council President Herman Van Rompuy (L), who oversaw the drafting of the treaty, said that the fiscal compact will “bring us, as it were, the economic and monetary union that is finally walking on two legs. AP photoThe leaders of 25 European states on Mar. 2 signed a new treaty designed to prevent the 17 euro countries from living beyond their means and preventing a repeat of the currency union’s crippling debt crisis.
The leaders hope the accord, known as the fiscal compact, will also lead the way toward closer political and economic integration in the eurozone.
“It will bring us, as it were, the economic and monetary union that is finally walking on two legs,” said European Council President Herman Van Rompuy, who oversaw the drafting of the treaty.
Only Britain and the Czech Republic decided not to sign the agreement, triggering some concern over a rift in the 27-country European Union.
The fact that not all EU states backed the new rules forced the others to set them up in a separate treaty, rather than integrating them into EU law. That prevents its signatories from taking advantage of some of the bloc’s established institutions, such as the European Commission, the EU’s executive that usually oversees the implementation of EU law.
After a relatively smooth drafting process, the most difficult part of bringing the new rules into force begins. All participating governments have to ratify the treaty at home, a process that may prove difficult in some places.
Europeans weary of EU
Many Europeans have grown weary of the EU and the euro. Two years of painful austerity in the poorer countries have taken their economic toll, while many in the richer countries are getting frustrated over funding the expensive bailouts for Greece, Ireland and Portugal.
Others fear that the tighter spending rules including a prohibition of deficits of more than 0.5 percent of annual output will limit governments’ room to maneuver in tough economic times and force German-style fiscal discipline on countries with vastly different economies and cultures.
However, the new deficit limits make some exceptions, such as for severe recessions and other unexpected economic circumstances.