BRUSSELS (MNI) – EU leaders on Monday trumpeted the intention of 25
out of the EU’s 27 member states to sign up for a new fiscal compact and
heralded the approval of a new treaty establishing a permanent bailout
fund for the Eurozone.

Czech Prime Minister Petr Necas told his colleagues he couldn’t
commit to the treaty as it stands because he lacks a mandate from his
parliament, which must approve it. The Czechs are isolated over their
insistence that the treaty address overall government debt limits as
well as budgetary deficit.

Nine other countries that indicated their intention to sign,
including Ireland, also need parliamentary approval before their
commitments can be fully confirmed. Irish opposition parties want to
force the government to hold a referendum on Ireland’s participation in
the fiscal treaty, but the government is keen to avoid one, fearing a
voter revolt against painful fiscal austerity.

Polish opposition to the treaty was overcome by a last minute
compromise to allow signatories that do not yet use the euro to
participate in key decisions about euro area governance and the treaty.
France had pushed for a more exclusive decision-making club of current
Eurozone members only.

The fiscal compact, formally known as the “Treaty on stability,
coordination and governance in the economic and monetary union,” will be
signed by EU leaders on March 1 when they meet again in Brussels to
discuss the financial adequacy of both the temporary and permanent EU
bailout funds.

UK Prime Minister David Cameron already gave his ‘no’ vote on the
fiscal compact last December, requiring the other EU leaders to go back
to work to craft the new treaty. Speaking to reporters after the summit,
the UK leader said he was unlikely to stand in the way of allowing the
European Court of Justice to enforce the treaty’s rules, even though
those rules will not fall under EU law.

Cameron said he would be watching out for the UK’s national
interest when the other EU countries begin to implement their new
agreement.

“If they are going to stick to fiscal union issues and all the
things they are planning to do, then that is something Britain is
comfortable with,” he said. “In as much as this is about fiscal union,
fine. Start to encroach on the single market – not fine.”

Cameron also criticized Eurozone leaders’ management of the crisis
and their fierce focus on fiscal rules.

“Please get on and sort out what is going wrong in the Eurozone,
because this is doing damage to Britain,” he said.

“I understand particularly why the Germans want to make sure that
others in Europe keep tight fiscal rules and don’t run up big deficits
and debts,” the British prime minister said. “Do I think this treaty on
its own is going to solve the problems of the Eurozone? No I don’t. As I
have said, there is a fiscal issue but there’s also a competitiveness
issue; not just fiscal. And just piling up fiscal rules won’t help
Spain, it won’t help Italy, or Portugal compete.”

EU leaders in recent weeks have bowed to those who criticize them
for not doing enough to boost growth and employment. EU Council
President Herman Van Rompuy said after the summit that EU leaders
“recognized that financial stability in itself is not enough to get out
of the crisis,” and that Europe needed to “do more on economic growth
and employment.”

EU member states should focus on “growth friendly fiscal
consolidation” and “job friendly growth,” Van Rompuy said.

At the summit tonight, EU leaders gave the green light to the
European Commission to help countries come up with a job “action team,”
and they endorsed a Commission plan to divert E82 billion in unspent EU
funds to aid small businesses and fund youth employment schemes.

Although the leaders found time to endorse an oil embargo against
Iran and call for the UN Security Council to act on Syria, discussion on
Greece was pushed to bilateral talks after the summit between top EU and
European Central Bank officials and Greek Prime Minister Lucas
Papademos.

Greece’s European partners have grown increasingly frustrated with
Athens’ failure to meet the conditions tied to its bailout. However, EU
leaders distanced themselves from a suggestion by Germany over the
weekend that they should appoint an EU budget Tsar to preside over
Greece’s budgetary affairs.

Athens needs Eurozone leaders to approve a second bailout deal
before a E14.4 billion bond redemption comes due in March, but talks are
being held back by parallel negotiations between Greek authorities and
international bond holders over a debt restructuring deal.

–Brussels bureau: +324-9522-8374; pkoh@marketnews.com

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