Tories claim victory as new treaty draft leaked

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UK Conservatives have welcomed "clear concessions to Britain" which were included in the latest draft of the European fiscal pact, leaked to the press yesterday (11 January). The European Parliament meanwhile rejected the new treaty draft, saying it undermines the EU institutions.

A leaked copy of the third draft of the treaty was leaked on the website of the eurosceptic British think tank Open Europe following Tuesday's latest round of negotiations.

The talks, hosted by European Council President Herman Van Rompuy, were held in the presence of UK representatives, despite Prime Minister David Cameron’s decision to veto the treaty.

The draft appears to reduce the role of the European Commission in policing fiscal discipline in the eurozone, giving more room for peer pressure amongst the member states. It also waters down a requirement to enforce the new fiscal rules with constitutional or equivalent legal means.

In case of breach of fiscal rules, any eurozone member country can seek redress in the European Court of Justice, or ask the Commission to write a report. In previous drafts, such an initiative could only be taken by the European Commission. The court's decision would be binding on the parties.

Another amendment in the draft stipulates that 12 eurozone member countries must ratify the treaty before it enters into force, down from 15 in the previous version. (The eurozone currently has 17 member countries).

The treaty will force member states to run a balanced budget and limit public deficits to 0.5% of gross domestic product in an effort to avoid a repeat of the sovereign debt crisis currently shaking the eurozone. Where debt is lower than 60% of GDP, deficits of up to 1% would be tolerated. Temporary deviations will only be allowed in cases of unusual event with a major impact on the financial position of the government or in periods of severe economic downturn for the euro area.

UK Conservatives claim victory

British Conservatives welcomed the new treaty draft, saying it reduces the role of EU institutions. Crucially for Cameron, the new text drops any reference to "deeper integration in the internal market" amongst the signatories, a provision that France seemed keen to insert into the treaty.

"This is a major step in the right direction and a recognition by Europe's would-be power brokers that they cannot ride roughshod over the UK's interests," said Martin Callanan, the leader of British Conservatives in the European Parliament.

"It is also helpful that they now plan to rely much less on use of the EU institutions, something we have said all along would be illegal and which we will oppose."

Under Title 1 on "purpose and scope", the previous version read:

– the contracting parties agree … "on a stronger coordination of economic policies, involving enhanced governance to foster fiscal discipline and deeper integration in the internal market as well as stronger growth, enhanced competitiveness and social cohesion."

The new version under the same title reads:

– the contracting parties agree … "to strengthen the economic pillar of the Economic and Monetary Union by adopting a set of rules intended to foster budgetary discipline through a fiscal compact, to strengthen the coordination of economic policies and to improve the governance of the euro area, thereby supporting the achievement of the European Union's objectives for sustainable growth and employment."

"Make no mistake," Callanan said, "this progress is entirely down to the clear and purposeful way the Prime Minister and UK negotiators have set out their objections to this deal, and the forcefulness of our arguments”.

"Far from sitting in isolation in Europe, Conservatives by their strong stance are directly influencing the shape and scope of this agreement. We are using that influence to benefit Britain," Callanan said.

Denmark won’t change its constitution

Meanwhile, Denmark, the country holding the EU's rotating presidency, declared its intention to sign the fiscal compact even though it has no plans to join the euro for the time being.

Speaking to journalists yesterday (11 January), Foreign Minister Villy Søvndal made it clear that the country would not change its constitution, which has not been amended for 60 years.

Apparently, the new draft that waters down the requirement to enforce the new fiscal rules with constitutional or equivalent legal means is well received in Copenhagen.

Danish officials said that the country’s requirement that its participation in the fiscal compact would not force the country to adopt the euro at a later stage had been met with understanding.

'Draft is unacceptable'

Reactions were much more hostile in the European Parliament, where a group of MEPs were invited to join the treaty negotiations as observers. The assembly is not a party to the treaty, which for now is essentially an intergovernmental agreement among sovereign nations.

MEPs Elmar Brok (EPP, Germany), Roberto Gualtieri (S&D, Italy), Guy Verhofstadt (ALDE, Belgium) and Daniel Cohn-Bendit (Greens/EFA, France) said the latest draft is not compatible with the existing EU treaties and that it fails to respect the "Community method" of decision-making where EU institutions take precedence over national governments.

"Specifically, the draft does not guarantee that any decision to implement the new agreement would be taken via the normal procedures laid down in the EU treaties to ensure proper democratic scrutiny and accountability," the MEPs said in a statement.

The Parliament’s representatives voiced concern about the consistency of the draft with the economic governance "six pack" legislation adopted in September 2011. They also criticised what they see as insufficient provisions for solidarity and renewed growth.

An agreement to tighten fiscal discipline in the wider EU-27 proved impossible at the December EU summit, after British Prime Minister David Cameron made "unacceptable demands" to exempt London's financial district from financial market regulations.

Faced with a UK veto, EU leaders agreed that a new intergovernmental treaty should tighten fiscal discipline in the eurozone and address the bloc's debt problems.

The treaty is expected to be signed by March 2012 and opened to ratification by nations outside the 17-member eurozone.

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