Van Rompuy: No treaty needed for tighter fiscal rules

The President of the European Council has said a new EU treaty might not be needed to put tighter fiscal rules into action.

The German and French leaders have written to Herman Van Rompuy to outline their plan to save the single currency ahead of a major two-day summit which kicks off in Brussels today.

But in response, Mr Van Rompuy said the changes could be achieved through minor adjustments to the current EU treaty.

The main aim is to reinforce rules for eurozone states to keep their deficit and debt below a set proportion of their GDP.

France and Germany are determined to push through sweeping financial changes in Europe and restore the stability of the single currency.

Paris and Berlin will call for a raft of new financial measures applying to the 17 eurozone countries, at an EU summit in Brussels.

As well as tough new controls on eurozone economies, including automatically-triggered sanctions if eurozone states breach debt and deficit criteria, the pair are calling for a tax on financial transactions within the zone, common corporate tax rates and harmonised employment rules.

Taoiseach Enda Kenny is bound to defend Ireland's 12.5% corporate tax rate against a higher single rate for the eurozone.

British Prime Minister Mr Cameron and the other non-eurozone leaders in Europe will be told that, with or without their blessing, the eurozone group intends to press ahead with the necessary treaty change within months.

Mr Cameron is believed to be relaxed about the 17 eurozone members pressing ahead with a financial transactions tax, on the grounds that it would drive more business towards the City of London. He has refused to back an EU-wide tax, however, because it would drive business out of London unless applied globally.

His summit concern is that a tighter-knit “inner core” of 17 countries with their own treaty and financial controls would risk Britain being absent from decisions directly affecting the country – particularly on the EU single market and financial services rules crucial to the City of London.

“We’d rather be in the room when there is an issue which directly affects out national interest being discussed” pointed out one official.

Mr Kenny and Mr Cameron joins fellow EU leaders for dinner tonight in Brussels and the first round of summit talks to try to hammer out a long-term eurozone stability deal.

And as the latest crucial summit unfolds over tonight and into tomorrow, Mr Van Rompuy himself will be pushing for a different scenario in which existing EU rules are used to enable tougher economic controls to be agreed without a treaty change – and without the need for ratification of the move by national parliaments.

The scene is therefore set for a complex, lengthy, and fractious summit stand-off over how to provide the kind of assurances markets are demanding about the eurozone’s long-term prospects.

In addition the summit is supposed to work out how to implement more immediate answers agreed at the last summit to boost an existing EU bailout fund and pay Greece the latest slice of the bailout money that is keeping its economy afloat.

The letter to the summit from Chancellor Merkel and President Sarkozy – now clearly in the driving seat as the eurozone crisis deepens – calls for “a renewed contract between the Euro area member states”.

Some countries around the table are concerned about the scale of Franco-German dominance of the EU club, European commissioner Laszlo Andor told the BBC’s 'World Tonight' programme.

“Very often when we (the EC) speak with other member states....you hear a certain disappointment and or even bitterness about how certain deals or bargains are handed out without the official meetings... and other countries might be taken for granted.”