EU Leaders Agree on Limited Treaty Changes, New Budget Rules, to Handle Debt Crisis

EU leaders agree on limited treaty changes to handle debt crisis

BRUSSELS, Oct. 28, 2010 (Xinhua) --

European Union (EU) leaders agreed on Thursday to make limited changes to the bloc's treaty to accommodate a German-Franco call for the creation of a permanent mechanism to handle debt crisis.

Diplomatic sources said the EU leaders, meeting here for a two- day summit, had reached an agreement in principle and EU President Herman Van Rompuy would be tasked with examining options for "a light treaty change."

Germany and France had issued a joint call for changes to be made to the EU's reforming Lisbon Treaty so that a permanent crisis resolution mechanism could be established to deal with future debt crisis in the eurozone.

The proposal was initially opposed by some EU member states, for fear that any renegotiation of the Lisbon Treaty, which replaced the failed Constitution Treaty and just came into force last December, would open a Pandora's Box and lead to years of bargaining and ratification chaos.

While leaving for Brussels to attend the EU summit, German Chancellor Angela Merkel reiterated the necessity to change the Lisbon Treaty for "permanently assuring the stability of eurozone. "

Germany was the largest contributor to the 110-billlion-euro ( 152 billion U.S. dollars) bailout of Greece and a 750-billion-euro (about 1 trillion dollars) rescue package established in May to counter the spread of the Greek debt crisis, which would expire by 2013.

Berlin had objected a simple extension of the rescue package, warning that without changes to the Lisbon Treaty, any of its contribution to the future bailout of overspending eurozone members could be annulled by its Constitutional Court.

The treaty contains a clause which prohibits EU member states from bailing each other out.

The establishment of a permanent crisis resolution mechanism was part of a reform plan discussed on Thursday by the EU leaders, aimed to prevent and manage the Greek-style debt crisis.

 A report prepared for the summit by a Van Rompuy-led task force said in the medium term there is a need to establish a credible crisis resolution framework for the eurozone capable of addressing financial distress and avoiding contagion, but the precise features and operational means of such a crisis mechanism will require further work.

Parallel with the call for a permanent crisis resolution mechanism, Germany and France also wanted future violators of EU budgetary rules in the eurozone to be temporarily deprived of their voting rights in EU decisions.

But the radical proposal appeared to have won little support among the EU leaders.

Editor: Wang Guanqun

EU Leaders Back New Budget Rules to Stave Off Crises

France and Germany have won support from their EU partners for limited changes to the Lisbon Treaty that would bolster the bloc’s defences against future financial crises.

Frederic SIMON,

FRANCE 24 correspondent, Brussels.

October 29, 2010

Kathryn STAPLEY (video)  

REUTERS -

The European Union on Thursday supported calls by Germany and France for limited changes to the bloc's main treaty to help shore up Europe's defences against any new financial crises.

EU leaders agreed at a summit that changes were needed to create a permanent system to handle sovereign debt problems and endorsed tougher budget rules, including sanctions on states that do not keep deficits and debt in check.  

But Berlin failed to win widespread support for demands to suspend the voting rights of member states which breach the rules. This would have required more radical treaty change and will be looked at only after the other measures are dealt with.  

The leaders asked Herman Van Rompuy, the president of the EU Council grouping national governments, to prepare changes to the Lisbon treaty in time for agreement at a summit in December and said he should work on them with the European Commission.  

"Today we took important decisions to strengthen the euro zone," Van Rompuy told a news conference after discussions described by several participants as heated and emotional.  

"UK Prime Minister David Cameron appears to have been instrumental in forging this deal".

"We recommend a robust and credible permanent crisis resolution mechanism to safeguard the financial stability of the euro zone as a whole."  

The changes to the treaty are to be agreed by mid-2013 and are part of Europe's efforts to ensure it can cope with any repeat of the Greek sovereign debt crisis this year which threatened the future of the euro.  

Germany, Europe's biggest economy, says a permanent system must replace the ad-hoc 440-billion euro safety net created in May for all euro zone states. It also says it should be partly funded by the private sector and entail strict conditions.