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29 Oct, 2010 05:50

EU leaders back tougher rules to avoid future debt crises and threats to euro

At a Brussels summit, EU leaders have agreed to prepare changes to the organization's fundamental Lisbon Treaty, involving tougher financial discipline and punishment for overspenders.

They also agreed on a permanent crisis mechanism to act as a safety net for the eurozone. The aim is to prevent another debt crisis, like the one that hit the euro this year when Greece nearly defaulted. EU leaders want a permanent European Financial Stability Fund, which they said was necessary to help countries when they get into trouble.

“Today we took important decisions to strengthen the eurozone. We have endorsed the final report of the task force,” said President of the European Council Herman Van Rompuy at a news conference, after the first day of the summit. “We have also found an agreement about the procedure to decide on a crisis mechanism for the eurozone.”

He added, “The European Council will revert to this method at its December meeting with a view to taking the final decision both on the outline of a crisis mechanism and on a limited treaty amendment so that any change can be ratified at the latest by mid-2013.”

It is the first time in EU history that an agreement has been reached on imposing penalties on member countries that breach the Stability and Growth Pact which rules that a national debt limit is 60 per cent of GDP and an annual budget deficit must not be higher than three per cent of GDP. According to 2009 results, those conditions were breached by 20 of the 27 member states.

German Chancellor Angela Merkel was also demanding that violators of the euro rules lose their voting rights in the EU.

President of the European Commission Jose Manuel Barroso, though, called it “unacceptable”.

“If treaty change is to reduce the rights of member states on voting, I find it unacceptable and frankly speaking it is not realistic,” he said. “It is incompatible with the idea of limited treaty change and it will never be accepted by the unanimity of member states.”

The changes were strongly pushed by Germany and France who never again want to pay such a high price for other countries’ irresponsible money management, as they did this year when the EU had to come up with hundreds of billions of euros to bail out Greece, Ireland, Portugal and Spain.

“Where’s Europe in all this? We are supposed to have created this economic bloc, a trading bloc, a very powerful bloc – but when there’s a crisis, it is individual member states that have to pick up the pieces,” said MEP Nirj Deva. “And it is slowly beginning to dawn on the leaders who run all this, that this is not working.”

Eurosceptics say the reason it is not working is because the economies in the eurozone differ so much that it is impossible to have common monetary policy and it is the strong that have suffered. Germany particularly paid the lion’s share into a 750 billion euro fund to bail out Greece.

Alexander Alvaro, a German politician and Member of the European Parliament with the Free Democratic Party of Germany, said the fact that Germany and France are trying to change the Lisbon treaty is a bad example of cooperation. The two member states of the union are trying to go ahead alone, leaving the other 25 behind, without trying to find a common approach. But it is not the political divorce that is being discussed in Brussels, he believes.

“It is definitely a political question now and it might develop into a crisis if member states are not trying to be realistic, but trying to preserve what they have,” Alvaro pointed out.

“What we would need is an automatic sanction in case the deficit is so high that it starts to endanger other countries,” he added.

According to MEP Gerard Batten, the only solution to the European Union’s financial problems is to get rid of the single currency.

“Economically it [the EU] is in a terrible state because of the European single currency. Greece, Portugal, Spain – all these countries, their economies are going down the tube,” he said. “The economies of countries like Germany, France and the UK could be a lot healthier if they weren’t burdened with EU regulation, and in the case of France and Germany – with membership of the euro. What we need is to get rid of the European single currency.”

There is a long way to go along Europe’s path to economic stability, believes Dr. Lee Rotherham from the TaxPayers Alliance.

“If you look at how the economic and monetary union was put together and compare that with how other federal currencies, such as in the US and in Germany, were put together, you can see that there’s a long process where power is constantly going towards the center,” he told RT.

According to Jon Gaunt, head of the EU referendum campaign in the UK, seventy-five percent of British people want a referendum allowing them to have a say about whether Britain should stay in the EU or get out.

We didn’t cause the problem: it was the bankers and lack of regulations by politicians across the eurozone,” claimed Gaunt. “I don’t understand why we have to pay for that. It’s obvious the German people feel the same way, which is why Angela Merkel is trying to change the Lisbon Treaty now. But I’m saying, if you want to change it, you’re going to have the referendum.