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European Council concludes discussion on the new fiscal compact

<p>© European Union, 2011<br />
 President of the European Council Herman Van Rompuy and<br />
 President of the Commission José Manuel Barroso at the press

© European Union, 2011
President of the European Council Herman Van Rompuy and
President of the Commission José Manuel Barroso at the press conference

At the end of the 8-9 December EU summit in Brussels, the President of the European Council Herman Van Rompuy confirmed that the 17 members of the euro area and several other EU countries were ready to participate in the new fiscal compact and engage in a significantly stronger coordination of economic policies.


The goal of the compact, as a response to the current crisis, is to strengthen fiscal discipline and introduce more automatic sanctions and stricter surveillance.


The fiscal compact agreed today will be made legally binding by an international agreement. The agreement will be open to the EU member states that are currently not members of the euro area. All EU member states apart from one said they were considering participating.


The precise number of participating countries will be known after the national parliaments have been consulted. "I am optimistic because I know that it is going to be very close to 27", said Van Rompuy. "In fact, 26 leaders are in favour of joining this effort. They recognise that the euro is a common good."


The main elements of the fiscal compact include a requirement for national budgets to be in balance or in surplus (the structural deficit should not exceed 0.5% of nominal GDP) and a requirement to incorporate this rule into the member states' national legal systems (at constitutional or equivalent level).


Member states undergoing an excessive deficit procedure will have to submit to the Commission and the Council for endorsement the structural reforms they plan to take in order to meet the requirement to correct excessive deficits.


The member states will also have to report on their national debt issuance plans.


The international agreement may be signed in March or earlier. The objective remains to integrate these provisions into the treaties of the Union as soon as possible.


Herman Van Rompuy declared that the European Stability Mechanism (ESM) treaty will be finalised in the coming days with the aim of ratifying it by mid-2012.


The heads of state and government also declared that the rules governing the excessive deficit procedure will be reinforced for the euro area. There will be "automatic consequences" unless a qualified majority of euro area member states vote against. The member states would also have to vote by qualified majority to stop the Commission from imposing sanctions.


The member states are also committed to coordinating their economic policies and working towards a common economic policy.



More information:

Statement by the euro area heads of state and government (pdf)

European Council conclusions (pdf)

Press statement by the President Herman Van Rompuy (pdf)

Press conference webcast

European response to the crisis

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