26 out of 27 EU member states have backed a tax and budget pact to tackle the eurozone debt crisis. The 17 countries that use the euro have all agreed to the deal. Except UK, all EU countries have agreed to Fiscal Deal.
After 10 hours of talks, all 17 members of the euro zone and the six countries that aspire to join resolved to negotiate a new agreement.
EU Fiscal Deal
The so-called fiscal compact agreed Friday includes a rule that annual structural deficits should not exceed 0.5% of nominal gross domestic product. This rule will be introduced in nations’ constitutions and the European Court of Justice will verify compliance. Eurozone members and others will adopt an accord with penalties for breaking deficit rules. It will be backed by a treaty between governments, not an EU treaty.
UK rejects Deal
Only the UK has said it will not join. Prime Minister David Cameron said he had to protect key British interests, including its financial markets. Mr Cameron said he had done “the right thing” by not signing up to the deal, as it was not in Britain’s interests.
EU leaders aim to have the pact – known as a “fiscal compact” – ready to take effect in March or before.
- A cap of 0.5% of GDP on countries’ annual structural deficits
- Automatic consequences” for countries whose public deficit exceeds 3% of GDP.
- Tighter rules to be enshrined in countries’ constitutions.
- EU’s permanent bail out facility, the European Stability Mechanism (ESM), to be accelerated and brought into force in July 2012.
- Eurozone and other EU countries to provide up to 200bn euros to the International Monetary Fund (IMF) to help debt-stricken eurozone members.
- Adequacy of 500bn-euro (£427bn; $666bn) limit for the ESM to be reassessed
The market is reacting very lukewarm and the EU fiscal deal fails to lift sentiment substantially. Most European markets closed 1.5-2%, up due to the EU deal.