BRUSSELS (MNI) – The following is the text of a statement issued by
the European Council Friday:

The European Union and the euro area have done much over the past
18 months to improve economic governance and adopt new measures in
response to the sovereign debt crisis. However, market tensions in the
euro area have increased, and we need to step up our efforts to address
the current challenges. Today we agreed to move towards a stronger
economic union. This implies action in two directions: – a new fiscal
compact and strengthened economic policy coordination; – the development
of our stabilisation tools to face short term challenges.

A Reinforced Architecture for Economic and Monetary Union

1. The stability and integrity of the Economic and Monetary Union
and of the European Union as a whole require the swift and vigorous
implementation of the measures already agreed as well as further
qualitative moves towards a genuine “fiscal stability union” in the euro
area. Alongside the single currency, a strong economic pillar is
indispensable. It will rest on an enhanced governance to foster fiscal
discipline and deeper integration in the internal market as well as
stronger growth, enhanced competitiveness and social cohesion. To
achieve this objective, we will build on and enhance what has been
achieved in the past 18 months: the enhanced Stability and Growth Pact,
the implementation of the European Semester starting this month, the new
macro-economic imbalances procedure, and the Euro Plus Pact.

2. With this overriding objective in mind, and fully determined to
overcome together the current difficulties, we agreed today on a new
“fiscal compact” and on significantly stronger coordination of economic
policies in areas of common interest.

3. This will require a new deal between euro area Member States to
be enshrined in common, ambitious rules that translate their strong
political commitment into a new legal framework.

A New Fiscal Compact

4. We commit to establishing a new fiscal rule, containing the
following elements:

–General government budgets shall be balanced or in surplus; this
principle shall be deemed respected if, as a rule, the annual structural
deficit does not exceed 0.5% of nominal GDP.

— Such a rule will also be introduced in Member States’ national legal
systems at constitutional or equivalent level. The rule will contain an
automatic correction mechanism that shall be triggered in the event of
deviation. It will be defined by each Member State on the basis of
principles proposed by the Commission. We recognise the jurisdiction of
the Court of Justice to verify the transposition of this rule at
national level.

–Member States shall converge towards their specific reference level,
according to a calendar proposed by the Commission.

–Member States in Excessive Deficit Procedure shall submit to the
Commission and the Council for endorsement, an economic partnership
programme detailing the necessary structural reforms to ensure an
effectively durable correction of excessive deficits. The implementation
of the programme, and the yearly budgetary plans consistent with it,
will be monitored by the Commission and the Council.

–A mechanism will be put in place for the ex ante reporting by Member
States of their national debt issuance plans.

5. The rules governing the Excessive Deficit Procedure (Article 126
of the TFEU) will be reinforced for euro area Member States. As soon as
a Member State is recognised to be in breach of the 3% ceiling by the
Commission, there will be automatic consequences unless a qualified
majority of euro area Member States is opposed. Steps and sanctions
proposed or recommended by the Commission will be adopted unless a
qualified majority of the euro area Member States is opposed. The
specification of the debt criterion in terms of a numerical benchmark
for debt reduction (1/20 rule) for Member States with a government debt
in excess of 60% needs to be enshrined in the new provisions.

6. We will examine swiftly the new rules proposed by the Commission
on 23 November 2011 on (i) the monitoring and assessment of draft
budgetary plans and the correction of excessive deficit in euro area
Member States and (ii) the strengthening of economic and budgetary
surveillance of Member States experiencing or threatened with serious
difficulties with respect to their financial stability in the euro area.
We call on the Council and the European Parliament to rapidly examine
these regulations so that they will be in force for the next budget
cycle. Under this new legal framework, the Commission will in particular
examine the key parameters of the fiscal stance in the draft budgetary
plans and will, if needed, adopt an opinion on these plans. If the
Commission identifies particularly serious non-compliance with the
Stability and Growth Pact, it will request a revised draft budgetary
plan.

7. For the longer term, we will continue to work on how to further
deepen fiscal integration so as to better reflect our degree of
interdependence. These issues will be part of the report of the
President of the European Council in cooperation with the President of
the Commission and the President of the Eurogroup in March 2012. They
will also report on the relations between the EU and the euro area.

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