EU officials lay out draft fiscal deal ahead of summit

EU OFFICIALS have laid out a new agreement to tighten fiscal rules for the eurozone and other participating EU countries yesterday, hoping to push ahead with deeper economic integration and get on top of the two-year-old debt crisis.

EU members will discuss the eight-page draft for the first time at a meeting in Brussels on Tuesday, with the aim of securing ratification from at least nine eurozone countries potentially by the end of January, a threshold that would bring the agreement into force as soon as March.

The deal — dubbed a new “fiscal compact” by ECB chief Mario Draghi — was drafted after a summit on December 8-9, when all EU leaders, except Britain’s David Cameron, agreed it was the right way forward.

While isolated in the immediate aftermath of the summit, Britain will be allowed to follow discussions on the new agreement as an “observer”, joining the other 26 EU countries as they negotiate the fine print of the deal.

“It’s quite clear: the UK will be there with observer status,” an EU official told reporters. “The UK said from the outset they didn’t want to get involved in this text, so they will be there, but as an observer for the whole process.”

The main aim of the agreement is to bind eurozone countries into tighter fiscal rules, including the need to keep their budget deficits below 3% of gross domestic product (GDP) and their debt levels below 60% of GDP.

There is also a stipulation that countries should aim to keep their primary deficits — which exclude the cost of debt financing — below 0.5% of GDP over the economic cycle, an objective that has been called “the golden rule”.

Participating countries that fail to meet the targets can be taken to the EU’s highest court, the European Court of Justice — an effort to enforce stricter and more automatic sanctions on those that breach rules that have all too often been violated in the past, including by France and Germany.

“Any contracting party which considers that another contracting party has failed to comply... may bring the matter before the Court of Justice of the European Union,” article 8 of the 14 article draft agreement states.

“The judgment of the Court of Justice of the European Union shall be binding on the parties in the procedure, which shall take the necessary measures to comply with the judgment within a period to be decided by said court.”

In the coming weeks, representatives from the 26 countries expected to take part in the pact will meet to refine the details, with a final agreement expected in January.

— Reuters