–Verbatim Statement By EU President Van Rompuy Follows At Bottom

BRUSSELS (MNI) – Eurozone leaders ended their special summit here
in the wee hours of the morning and announced they had agreed on the
general principals of a new “Pact for the Euro,” which includes three
pillars: sustainable public budgets; improved competitiveness; stable
financial systems.

European Council President Herman Van Rompuy, who announced the
results of the summit to reporters in a press conference that ended
after 2 a.m., acknowledged that those goals “may sound familiar.”
However, “what has changed is the political committment,” he asserted.

He said the measures agreed tonight, to be fully fleshed out by the
EU summit at the end of March, will allow the Eurozone “to finally turn
the corner” on the sovereign debt crisis.

The Eurozone leaders also agreed to reduce the interest rates on
aid loans to Greece by 100 basis points and to extend the maturities on
those loans from three to seven years, to match the maturities on loans
granted to Ireland.

They established the general principle of reducing interest rates
on bailout loans in the future by 100 basis from the level initially
charged to Greece and Ireland. But for the time being they did not agree
to reduce the interest rate for Ireland by 100 basis points, because the
new Irish government has not yet committed to the principal of
harmonizing tax polices, German Chancellor Angela Merkel and French
President Nicolas Sarkozy said in separate late-night briefings.

Before the crisis, Ireland benefited from the lowest corporate tax
in the Eurozone, and it is extremely reluctant to give that up.

The Eurozone leaders also agreed to increase the effective lending
capacity of the European Financial Stability Facility to its full E440
billion, primarily by increasing guarantees or paid-in capital in order
to maintain the fund’s AAA rating. The successor to the EFSF, the
European Stability Mechanism, will be allowed to lend up to E500 to
bailout EMU members.

Both the EFSF and the ESM will be authorized to purchase sovereign
bonds in the primary market from countries that enter into bailout
agreements and undertake the required conditions. The funds will not be
allowed to purchase debt on the secondary market, however.

A verbatim text of Van Rompuy’s statement follows:

“Another meeting, another world — from ‘no-fly-zone’ to
“Eurozone,” from “provisional council” to “permanent mechanism”. I am
glad to announce that tonight we have taken important decisions, after a
long and good discussion. We agreed on the “Pact for the Euro”. This
Pact is an important piece of our response to the public debt crisis.

We also agreed in principle on other major elements of the
“economic package”. Everything will come together at the European
Council end of March. This should allow us to finally turn the corner.

First, on the Euro Pact. The Euro Pact expresses everybody’s strong
political commitment to do what is required for our common good, the
euro. All 17 leaders of the Eurozone are convinced that their economies
need to be more competitive and more convergent. This is key. We live in
a global economy, and an invisible loss of competitiveness was a driver
of the public debt crisis in the Eurozone.

The Euro Pact’s objectives are: sustainable public finances; a
competitive economy; sound financial systems.

These objectives may sound familiar. What has changed, however, is
the political commitment. The Heads of Government will announce measures
under the pact, which they will put in place nationally. So alongside
market pressure, and alongside the existing institutional pressure, we
will now have strong peer pressure. This will give the commitments under
the Pact a politically binding force.

To get the Euro Pact agreed, I have worked very closely with the
President of the European Commission. We designed a balanced approach.

Firstly, the approach is not a “one size fits all”. It takes into
account country specific factors. We will agree on common targets and
Member States will be free in the choice of the means, in full respect
of their tradition. Like the tradition of social dialogue. Secondly, the
Euro Pact will be firmly anchored in our institutional framework. The
Commission gets a key role. The Pact comes on top of what we decided
already in the Task Force on economic governance. Thirdly, our non euro
area colleagues are invited to join us in this approach. I have insisted
all along on that.

In our next meeting at the end of March, colleagues will already
announce the first pledges under the Pact for the next 12 months.

Today we also welcomed the ambitious measures which were announced
this morning by the Portuguese government. These are important measures
in themselves; they also reinforced the confidence and solidarity of the
partners in the Eurozone.

Indeed, on the other elements of the package, all partners agreed
tonight on three features of the temporary Facility and the permanent
Mechanism. Firstly, concerning the volume: we will make sure that the
full amount is available; 440 billion for the Facility and 500 billion
for the Mechanism.

Secondly, concerning the flexibility of the instruments, the
Facility and the Mechanism will have the capacity to intervene on the
primary market in the context of a programme (a programme with
conditionality).

Thirdly, concerning the pricing in the Facility, to better take
into account debt sustainability we will lower the interest rates, while
staying in line with the IMF pricing principles; and, in view of the
efforts of Greece, we decided to extend the maturity of the loans to
Greece and to lower the interest rates with 1 %.

As I said, the Euro Pact and the full package will be formally
adopted by the next European Council on 24 and 25 March.

A general remark to conclude. Why do we do all this work for the
euro? Not to undermine the welfare state. No, to safeguard the welfare
state. Not to hamper growth. No, to make economic growth and employment
possible.”

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