Tough new eurozone treaty proposes to cap deficits
BRUSSELS -- European Union leaders agreed Monday to move forward with a plan to forge a tighter budgetary union among countries that use the euro currency, including tougher sanctions on nations that spend beyond EU-set limits.
But some experts warned that the citizens of some countries may object to ceding authority to the EU as Greece sinks further in debt and the European public loses patience with a rescue that has dragged on for two years.
The United Kingdom and Czech Republic have not agreed to sign a new treaty giving the EU more authority over the budget process for individual nations. But the rest of the 27-member bloc did, said Herman Van Rompuy, president of the European Council, the EU's advisory body.
"Twenty-five is quite an achievement because the eurozone in itself is only 17," he said, referring to the number of countries that use the euro.
German Chancellor Angela Merkel said the treaty, "Is an important step to the stable union," and added that the negotiations were "very successful."
Driven by Germany, the new treaty would cap deficits and require the eurozone countries to pass laws ending their ability to run up huge national debts. It is to be signed in March.
But some nations may put the treaty to a vote first, and European analysts say many citizens do not want to lose national sovereignty over spending and taxing decisions.
"There is very little appetite among voters to give up key decisions over spending and taxation to be decided by people sitting in Berlin, Brussels and Frankfurt," said Mats Persson, director at Open Europe, a think tank.
A poll conducted by research firm Red C for the Sunday Business Post in Ireland says 72% of Irish people want to see a referendum on any new EU treaty.
"Whatever comes out will, almost certainly, have to be put to the people. I think fiscal responsibility is a good thing, but this is not the way to do it," said Brian Lucey, associate professor of finance at Trinity College Dublin.
The outcome Monday did not address the immediate crisis of Greece, which must restructure debt so that it can qualify for EU bailout funds. EU leaders agreed that the $654 billion bailout fund paid by the European Union, the IMF and the European Central Bank, would come into force in July, a year ahead of schedule.
The treaty agreed to Monday was a watered-down version of the initial proposal that had more austerity measures and stronger budget rules.
But it may be enough to "make it easier for Angela Merkel to defend in front of her domestic audience why German taxpayers should put up more cash," Persson said.
Konstantin Lange, 27, in Frankfurt, was not pleased about strengthening the bailout funds for other nations: "We have already put a lot of money there; if we don't put in more it will be lost. The politicians know that they have to do it."
