EU leaders sign fiscal treaty

25 national leaders agree tough new budget rules to be enshrined in national law.

The leaders of 25 member states of the European Union this morning (2 March) signed a fiscal compact treaty, committing their countries to tighter budget discipline. Two countries, the Czech Republic and the United Kingdom, abstained from signing the treaty.

The signing follows an agreement between leaders in December to conclude an international treaty to enforce tighter deficit limits, with the UK and the Czech Republic deciding not to accept the instrument.

Polish officials had voiced misgivings over the last few days about the exact wording of passages relating to Poland, which does not use the euro but is supposed to join the eurozone in the coming years. But in the end, Donald Tusk, Poland’s prime minister, signed the treaty.

Enda Kenny, the prime minister of Ireland, also signed the treaty. Kenny announced earlier this week that the text would go to a referendum.

The treaty will enter into force once 12 of the 17 EU member states that use the euro as their currency have ratified it.

“The treaty is an important part in our global strategy to restore stability in our European finances,” José Manuel Barroso, the president of the European Commission, said during the signing ceremony in the Justus Lipsius building, the headquarters of the EU’s Council of Ministers.

“This agreement and its binding rules…signals the irreversibility of the euro and the very important step forward in European integration,” Barroso said. “This treaty represents the very culture of financial stability that is the pre-requisite for a true economic union.”

‘Deep and long-lasting’ effects

Herman Van Rompuy, the European Council president, said the effects of the treaty “will be deep and long-lasting.”

He said the treaty will prevent “a repetition of the sovereign-debt crisis”.

Van Rompuy added that despite the fact that the treaty had to be created outside of the EU framework, “everything has been done to bring in the guarantees and qualities which only the EU’s institutional actors can provide”, notably by involving the European Commission and the European Court of Justice.

In the new treaty, signatories commit themselves to enshrine a debt brake in national legislation and to ensure their keep their budget deficits do not exceed 3% of gross domestic product.

Angela Merkel, Germany’s chancellor, who pushed most strongly for the treaty, welcomed its signing but warned that a great deal of work was still needed to get out of the economic crisis.

“We are not yet in a completely normal situation, we are still in a fragile situation, the crisis has not at all been overcome,” she said.

Merkel said that the EU’s member states would have to use the next two to three years to “give the world answers how we will together become more competitive in order to protect our prosperity, and in order for trust to emerge that what we have set out to do will in fact be implemented”.

Nicolas Sarkozy, France’s president who is campaigning for re-election, took a more optimistic view of the crisis.

He said that the leaders’ strategy was “beginning to bear fruit”, as was being shown by the significant fall in countries’ borrowing costs.

“It is a huge relief to see the financial crisis is no longer in the headlines morning, noon and night,” he said. “I think we have all been battered enough by the financial crisis, not to find ourselves in such a situation again. You only have to see the pictures from Greece, Spain, Ireland, Portugal and Italy to know that no one want to see that again.”

He added that there was “still the risk that things could flare up again”, but said that the crisis’s initial triggers were “no longer applicable”.

“There’s always the risk that one crisis is hiding another crisis but I really believe we are turning a page,” he said.

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