Drafting of treaty will attempt to avoid referendum

EU member states’ lawyers will immediately begin work on a new treaty with an eye to ensuring it does not trigger a referendum in any country.

Already, the leaders have watered down the involvement of the European Court of Justice in governments’ budgets as this would almost certainly mean the Irish Government going to the country.

However, Taoiseach Enda Kenny would not be drawn on the issue, saying it would be up to the Attorney General to advise on the issue. He said the substance rather than the process of implementation “was paramount”, but that interference with corporation tax was a “red line” for him.

He did not answer a question on whether Ireland would be forced to put the debt brake, the so-called golden rule, into the Constitution, which would mean asking the public for its permission.

EU leaders agreed that this rule, which says governments may not have budget deficits, should be “introduced in member states’ national legal systems at constitutional or equivalent level”.

The timetable is to have the first draft ready in January, wording agreed by March, and approval in all member states by the end of next year.

While all 17 eurozone states, at Germany’s insistence, have agreed to this treaty within a treaty, five non-eurozone states say they will sign up and four are to go back to their parliaments for a mandate, possibly leaving out only Britain.

French President Nicolas Sarkozy is particularly anxious to have the terms agreed before elections in April. As a result he is unlikely to return to his insistence that Ireland change its corporation tax system in case it holds up ratification.

As well as giving Germany the certainty it needs — that if they agree to eurobonds or allow the ECB to open up, countries will repay and not spend their money foolishly — the meeting also addressed the issue of a financial firewall.

But this fell short of what was proposed by European Council president Herman Van Rompuy. He wanted the current bailout fund, the European Financial Stability Facility, which is expected to leverage about €600 billion, to run in parallel to the EuropeanStability Mechanism (ESM) with another €500bn.

The ESM will come into force a year earlier, next July, and they have agreed to reassess the €500bn ceiling then.

This means Ireland will have to find €250 million to put into the fund a year earlier than expected, and pay a similar amount each year for five years to bring the total up to €1.2bn.

The other money-raising initiative is that member states will build up the IMF’s reserves by contributing €200bn, which the IMF will leverage into a bigger sum and lend back to eurozone states. Germany insisted on this workaround, which will come with IMF conditions on borrowing countries and will not be shown as debt on EU members’ books.

The Brussels-based economic think-tank Re-Define was not impressed with the outcome, saying: “The possibility of additional ECB support remains unclear, there are no credible plans for restoring growth and the institutional reform discussions are incomplete. This is not the sort of stuff that inspires confidence.”