25 EU countries sign up to German-led fiscal treaty

Angela Merkel turning back January 2012.jpg

EU leaders agreed yesterday (30 January) a treaty on tighter fiscal rules to preserve the eurozone from new crises. But the Czech Republic said it would not sign it for now due to ratification difficulties, while French President Nicolas Sarkozy said his country is unlikely to ratify before the 6 May presidential election.

As expected, the United Kingdom will not be part of the intergovernmental "Treaty on Stability, Coordination and Governance in the Economic and Monetary Union", while the Czech Republic said it could join the treaty at a later stage because its eurosceptic President Vaclav Klaus said he would not sign the ratification bill for now.

Sarkozy said his country is unlikely to ratify the treaty before the country holds two rounds of presidential elections in April and May.

François Hollande, the Socialist candidate who is leading in the opinion polls, says he will renegotiate the fiscal treaty if he is elected.

The treaty, which aims to strengthen fiscal discipline through the introduction of more automatic sanctions and stricter surveillance, is due to be signed on the occasion of the next EU summit on 1-2 March.

See coverage on EURACTIV EUX.TV


Non-eurozone countries to attend summits

Poland, a non-eurozone country, had threatened not to sign the deal if it is not allowed to take part in meetings of the single-currency states.

However, a compromise was found at the summit whereby non-eurozone countries which ratify the treaty will be allowed to attend summits at least once a year to discuss the "architecture" of the eurozone and competitiveness. Under the new treaty, eurozone leaders will meet at least twice a year.

According to the agreed text, the 'fiscal compact' will enter into force once it has been ratified by at least 12 countries using the common currency. EU leaders hope that ratification will be completed by the end of the year. It will be legally binding as an international agreement and will be open to the EU countries that do not sign it at the outset.

The aim is to incorporate the fiscal compact into EU law within five years of its entry into force, said Herman Van Rompuy, the European Council president who chaired the Brussels meeting.

French election looms large

German Chancellor Angela Merkel – a driving force in the deal – said she was not worried that France was postponing the ratification of the compact until after the presidential elections.

"EU policies work on a basis of continuity … Europe would not function anymore if with every change of national governing party EU legislation changed as well, all the time," Merkel said.

Asked about her open support for Sarkozy in the election campaign, she said: "Sarkozy supported me in my campaign. I am reciprocating his support. It is just an ordinary thing we have done between our countries".

The French election was also the subject of heated words between Sarkozy and British Prime Minister David Cameron. Speaking in a television interview on Sunday, Sarkozy said France had managed to preserve its industry, unlike the UK, which had none.

Cameron replied it was untrue that the UK had a smaller manufacturing sector than France. He said he "admired Sarkozy" but he also underlined that the UK would continue to monitor the fiscal compact, and challenge the use of the court to implement it if in future it damaged the EU single market.

Questioned on the same topic, Sarkozy said he intended no insult towards his "British friends". But he said that the truth was that the UK had concentrated – like its "US friends" – on the financial services industry. The UK and US were different from France and Germany in this respect, he said.

'Growth and jobs'

Seeking to promote a more positive economic agenda, EU leaders adopted a statement at the summit about growth and employment. The statement aimed at marking a turning point in Europe's two-year debt crisis after a long period in which EU leaders had concentrated mostly on austerity and crisis-fighting measures.

The summit statement, titled "Towards growth-friendly consolidation and job-friendly growth", requires every member country to adopt a national plan to tackle youth unemployment.

But the statement was met with scepticism from the European Socialist, Green and Liberal parties, which described it as "empty words" and criticised it for lacking financial backing.

In an apparent attempt to counter those views, European Commission President José Manuel Barroso said that money from the EU budget must be focused on growth. Some €82 billion was still to be allocated from the EU's regional budget of €347 billion for the period 2007-2013, he indicated.

"I have today proposed that the member states sit down with the Commission to look at how this money can be reprogrammed and accelerated towards growth-related projects. For instance, SMEs can use money from the Structural Funds as guarantee for loans they can get in the banks," Barroso said.

However, not all countries are enthusiastic about reallocating EU regional funds for other programmes. Poland for one, which is a big recipient of structural funds, sharply disagrees with the transfers.

Hungary, Austria in spat over youth unemployment

The issue of youth unemployment also triggered a spat between Austrian Prime Minister Werner Faymann, a Social Democrat, and his centre-right Hungarian counterpart, Viktor Orbán.

Some of the proposals for youth job creation are inspired by pilot programmes designed in Austria and promoted by the country's Social Democrats.

Orbán endorsed the summit's statement on youth employment, but added a personal note, saying that "youth unwilling to work for welfare" should be compelled to do so.

"That's not how we would do it," said Faymann. The Hungarian prime minister was apparently refering to its own schemes designed at putting Roma to work, which the opposition has compared to labour camps under Nazi or Soviet domination.

Merkel said young people should be given "a very quick possibility for traineeships and jobs when they leave school."

"Within the first months, the first offers need to be on the table for young people. In Germany, this works best when they are integrated in a company. We will put more flesh on the bones of this proposal," she added.

Reacting to the European Council conclusions on growth this evening, Guy Verhofstadt, president of the ALDE Group in the European Parliament said:

"EU leaders have failed in the only area where they could have made concrete progress today. Instead of decisive action they again chose procrastination. After 40 years of waiting, an agreement was found last year on a European patent but we still have to wait another six months for member states to agree on the seat of the court causing further delay and costing jobs across the Union at a crucial moment."

The European Parliament should be fully associated with the fiscal compact treaty negotiations, Verhofstadt said.

The Party of European Socialists criticised the "empty proposals" made before the summit by German Chancellor Angerla Merkel and French President Nicolas Sarkozy on youth welfare.

PES President Sergei Stanishev said the party wants to redirect at least €10 billion of unused European Social Funds to a special “youth employment strategy”. Another measure is the use of the 6% of all national and European budgets to be spent on high-quality education and to introduce the dual education system in all member states.

Greens/EFA co-president Daniel Cohn-Bendit said: "Another summit goes by and again Europe's 'leaders' have distinguished themselves by their lack of imagination and serious politics. The two-month sideshow surrounding the new fiscal compact has lost us more precious time and we have not moved any closer to resolving the Euro crisis. It is time for the EP to take the lead and give Europe's citizens some hope."

Rebecca Harms, Greens/EFA co-president, said after the summit: "There is a real danger that the EU is digging itself deeper into an economic hole, with the continued one-sided preoccupation with fiscal contraction and the absence of counter-cyclical measures to address the root of the crisis and turn the fortunes of eurozone economies around."

In his statement following the summit, UK Prime Minister David Cameron said the fiscal compact was fine "as long as it does not encroach on the single market".






European Central Bank President, Mario Draghi welcomed the agreement and underlined that "this is the first step towards fiscal union."





The President of the European Economic and Social Committee(EESC) Staffan Nilsson also welcomed the conclusions as the step towards "a more integrated, economic and fiscal union".

"The EU leaders have rightly identified the targets and the tools: the fiscal union, the single market, small and medium enterprises and youth employment. Europe needs not only to promote austerity measures, but also to ensure growth and competitiveness by stimulating the Single Market and releasing the potential of SMEs. Wasn't it time to focus resources, including the EU budget, on policies which can boost economy development and which can do it in a sustainable way?"

The European Youth Forum welcomed the intentions of the EU leaders to put the question of youth unemployment high on the agenda but question whether they will be able to deliver.

"Stimulating employment and creating growth remain the prerogatives of the Member States. However, Member States often have a lackluster track record in implementing EU decisions. We therefore need to see immediate action at national and, where applicable, regional and local levels. We expect ambitious plans within the National Reform Programmes to be finalised within the next few months."

Speaking at a press briefing, the Liberal Democrat and Reform Party President Sir Graham Watson welcomed the progress made at yesterday's European Council meeting but regretted the "slow, painful, incremental process" resulting from the absence of a clear vision for the continent.

"Herman Van Rompuy was appointed to lead the Council", he noted, "yet he spoke at last night's press briefing of maintaining 'as much as possible' the unity of the EU. Barroso was chosen to lead the Commission, yet all he proposes to help Europe's citizens weather the recession is the pulling together of the €82 billion of unspent money in a new programme for growth. These hardly constitute a vision for our continent capable of convincing citizens, let alone global investors."

The American Chamber of Commerce to the EU (AmCham EU) expressed its support to the measures agreed by the European leaders. "The fiscal pact approved at the summit is designed to prevent excessive deficits and unsustainable debt." Susan Danger, Managing Director of the AmCham EU said: "From a business perspective this is a step in the right direction; austerity alone won’t get us out of this economic downturn. We need to focus on finding ways to grow the economy as well."





An agreement to tighten fiscal discipline in the wider EU-27 proved impossible at the 8-9 December EU summit, after British Prime Minister David Cameron demanded that London's financial district be exempted from financial market regulations.

Faced with a UK veto, EU leaders agreed that a new intergovernmental treaty (fiscal compact) should tighten fiscal discipline in the eurozone and address the bloc’s debt problems. Along with Britain, Czech leaders have indicated they are not prepared to sign up for now.

The treaty will be signed by March 2012 and ratified before the end of the year.


  • 1-2 March: EU leaders to sign fiscal pact at summit in Brussels.

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