28/10 E.U. Moves to Tighten Rules Governing Euro Zone

By STEPHEN CASTLE
Published: October 28, 2010

BRUSSELS — The European Union approved plans to tighten the rules governing the euro early Friday, and said it would seek more changes and a limited alteration to the bloc’s main treaty in December.

At a meeting in Brussels, the leaders of the 27-nation bloc approved a set of tougher budget rules, crafted by their finance ministers, which included new sanctions against eurozone states that fail to keep deficits and debt in check, and earlier warnings over asset bubbles and declining competitiveness.

Its declaration also said the union will consider ways to change its governing treaty in December to set up a permanent fund to help eurozone nations in times of crisis.

But moves by the German Chancellor, Angela Merkel, for a more radical alteration to the treaty were rebuffed, as the leaders emphasized a more limited and technical set of changes.

That effectively tabled Ms. Merkel’s ideas of a more significant amendment of the treaty, aiming to deprive spendthrift nations of their EU voting rights.

In their declaration, the EU leaders said Ms. Merkel’s idea would be considered “subsequently,” suggesting it was not a priority.

“Most member countries, including us, are against the idea that voting rights can be withdrawn, also those related to the economic and monetary union,” said Jean-Claude Juncker, prime minister of Luxembourg.

In May, Mrs. Merkel reluctantly helped create a temporary crisis fund for the euro zone and, to make this permanent when its mandate expires in 2013, Ms. Merkel has said that she would need a treaty chance to satisfy Germany’s constitutional court.

On that issue the German Chancellor, who already had the support of France, won broad agreement.

“We need a robust and credible permanent crisis mechanism,” said Herman Van Rompuy, President of the European Council, where national governments meet. “Today all heads of state agreed on that need.”

But most governments are alarmed at the prospect of a full-scale treaty change, which might trigger referenda in some nations. Less than a year after the Lisbon Treaty went into force – a process that took eight years to bring to fruition – few nations feel ready for another lengthy and difficult exercise in institutional change requiring voter approval.

Mr. Van Rompuy, who will draw up the options for treaty change by December, said the changes would be “limited” and would be made “if possible using a quick procedure” – a formulation that excludes the idea of removing voting rights from nations that fail to comply with EU guidelines.

Instead it suggests that the EU is likely to opt for a simplified procedure for revising its treaty, which can only be used for more technical changes.

Earlier Ms. Merkel had pressed the case for changes that would curb voting rights for spendthrift nations.

“I also want to discuss the withdrawal of voting rights, Ms. Merkel told reporters on arrival in Brussels. “We have a Lisbon treaty in which there already is a withdrawal of rights when fundamental values of the European Union are damaged.”

But Jose Manuel Barroso, President of the European Commission, sought to limit the scope of any treaty change.

“If treaty change is to reduce the rights of member states on voting, I find it unacceptable, and frankly speaking it is not realistic,” he told a media conference.

The start of the two-day meeting was also marked by calls from the British Prime Minister, David Cameron, for austerity in the EU budget, prompting an unprecedented debate among about a dozen leaders at the start of discussions.

While many European nations, including Britain, have embarked on aggressive public spending cuts, the European Parliament voted last week for an increase of around 6 percent in the bloc’s budget.

“At a time when European countries, including the United Kingdom, are taking tough decisions on their budgets and having to cut some departments, it is completely wrong that European institutions should be spending more money on themselves in the way that they propose,” Mr. Cameron said.

As he arrived in Brussels Thursday, he began lobbying other leaders.

“Six percent is not acceptable,” he added, as he appealed for support to restrain the bloc’s budget increase to no more than the 2.91 percent jump agreed by the 27 EU nations in August.

The European Parliament now has joint powers in budget setting and negotiations are underway with the national governments.

But the parliament’s President, Jerzy Buzek, defended its stance when hea ddressed heads of government, sparking a debate led by Mr. Cameron.

“The Parliament has not called for unreasonable budgetary increases,” Mr. Buzek said in a speech to leaders. “We have shown some moderation.”

Later at a media conference, Mr. Buzek said between 10 to 12 leaders had intervened – the first time a lengthy debate has followed a presentation by the President of the European Parliament to summit meetings.

At Mr. Cameron’s request, the declaration agreed upon early Friday mentioned the need for budgetary restraint within the EU.

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About Uy Do

Banking System Analyst, former NTT data Global Marketing Dept Senior Analyst, Banking System Risk Specialist, HR Specialist
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