Euro crisis: EU-wide treaty change bid fails

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Nicholas Sarkozy said he would have preferred a treaty among all the members of the EU

Most European Union members have agreed to press ahead with a pact to tackle the eurozone debt crisis.

A German and French attempt to get all 27 EU states to back changes to the EU's treaties was dropped after objections from the UK.
Prime Minister David Cameron had insisted on an exemption for the UK from some financial regulations.
Instead, at least 23 countries will adopt an accord for those who break rules on deficits.
"We wish them [eurozone states] well because we want everyone to sort out their problems because we all need that [economic] growth," Mr Cameron said.

"But at the end of the day I made my judgment that it was not in Britain's interests [to take part]. I effectively wielded the veto."

The new tougher rules on spending and budgets will now be backed not by an EU treaty but by a treaty between governments. It will be quicker to set up but it may prove less rigorous, says the BBC's Europe editor Gavin Hewitt in Brussels.
But, he says, Europe has taken a big step towards closer integration, with binding rules over tax and spending, and sanctions against countries that overspend.

Analysis

Gavin Hewitt BBC Europe editor

 

There is now a two-speed Europe - after this long night, the French president accepted that.
There is, too, considerable antagonism towards Britain - it used its veto in what is seen in Brussels as Europe's hour of need.
What is unclear is whether European institutions can be used to implement a treaty between governments.
If EU officials are in the room, David Cameron has already laid down a marker that he expected the UK to be involved. It is all a recipe for further tussles.
The big question is what effect all this will have on the eurozone crisis. The main impact will lie in the long-term - the agreement has little to say about the debt mountains and the absence of growth in most of Europe.

Discussions on the details of the new fiscal arrangement are due to resume shortly.

European stocks opened slightly down on Friday on news of the announcement.
German praise Nearly 10 hours of talks could not produce an agreement involving all member states. Instead, the 17 members of the eurozone will work on a separate deal outside EU treaties. They will be joined by at least six and possibly eight other countries.
The UK and Hungary will play no part in a new inter-governmental agreement, while Sweden and the Czech Republic will consult their parliaments before making a decision.
Mr Sarkozy said the sticking point had been Mr Cameron's insistence on a protocol allowing London to opt-out on proposed change on financial services.
"We could not accept this," he said.

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David Cameron: It is better to have eurozone countries make arrangements separately

Mr Sarkozy said the new deal should be agreed by March.
During the talks, eurozone leaders agreed to work on tough new budgetary rules, which envisage automatic penalties.
They also said a ceiling on the size of the eurozone's bailout would be capped at 500bn euros (£427bn; $666bn).
The German Chancellor, Angela Merkel, praised the plan and said it would contribute to securing the euro.
"I believe that after long negotiations this is a very, very important result because we have learned from the past and from mistakes and because in future [there will be] binding decisions, binding rules, more influence from the commission, more community and with that higher coherence."

Crisis jargon buster

Use the dropdown for easy-to-understand explanations of key financial terms:

 

AAA-rating

 

The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is minuscule.

The head of the European Central Bank (ECB), Mario Draghi, said the accord would lead to much more discipline in economic policy, calling it "a very good outcome for the euro area".

Our correspondent says the immediate test will be whether this agreement persuades the ECB to act more aggressively in the markets and so lower the borrowing costs of troubled countries like Italy and Spain.