Portugal vote on EU fiscal treaty deals blow to Hollande

François Hollande March 2012 unhappy.jpg

François Hollande, the Socialist candidate and apparent front-runner in the French presidential election, suffered a blow as Portugal became the first EU country to ratify the 'fiscal compact' treaty that is designed to enforce stricter budget discipline in the eurozone.

The Portuguese Parliament on 13 April ratified by a commanding majority (204 of the 240 MPs) the fiscal compact treaty, signed on 2 March by 25 EU countries.

The treaty was largely the initiative of German Chancellor Angela Merkel and French President Nicolas Sarkozy.

Hollande maintained throughout his campaign that if elected, he would re-negotiate the treaty, arguing that relying on austerity alone would drag Europe's fragile economy into a prolonged recession. But more recently he started backing away from a radical overhaul of the treaty, indicating that if elected he would seek "add-ons" to include more pro-growth policies.

After the vote in Portugal, Hollande appears to have lost a major argument for re-negotiating the treaty – the fact that it had not been ratified. In France, a vote on the treaty is out of question before the presidential elections as the Socialists now hold a majority in the Senate.

Polls show Hollande and Sarkozy running neck-and-neck in the first round of voting on 22 April, but Hollande has a 10-point advantage in the second round on 6 May.

This is not the first time that the Portuguese centre-left has broken with the centre-left European family, which is more sceptical of the treaty agreed by all but the leaders of Britain and the Czech Republic.

In 2009, the then-Socialist government backed Portugal's José Manuel Barroso as European Commission president although he was the candidate of the European People's Party.

On 30 March the Greek Parliament has ratified the 'fiscal compact' treaty, EURACTIV has learned after the publication of this article.

All but two EU countries signed a fiscal pact to tighten budget discipline on 2 March, marking a coup for Germany which sought the accord to prevent a repeat of the loose spending that contributed to the economic crisis.

Only Britain and the Czech Republic did not sign the new treaty, under which all other countries in the 27-nation bloc are to write a golden rule on balanced budgets into national constitutions or equivalent laws. They also agreed to automatic correction mechanisms if the rule is breached.

Read our LinksDossier: Europe's new treaty: Towards a multi-speed union

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