EU leaders agree on budget discipline measures

EU leaders agree on budget discipline measures

European Union leaders have sealed a package of measures, including a fiscal treaty to enforce strict budgetary discipline, to resolve the euro zone debt crisis.

At a special summit, which concluded in Brussels on Monday night, 25 of the EU's 27 member-nations agreed on the draft text of the treaty, known as the fiscal compact, which will be signed at the next summit in March.

Britain had already opted out of the fiscal union when it was proposed by Germany and France at the last EU summit in December.

The Czech Republic, which like Britain opted not to adopt measures, told its EU partners that it will not join the treaty because of "constitutional reasons".

The fiscal treaty is designed to prevent excessive debt accumulation by forcing member nations to write into their constitution a "debt brake" like in Germany or to introduce similarly binding laws.

The treaty also calls for sanctions against those nations which violate the budgetary rules and empowers member nations to take to the European court of justice those who violate the budget rules.

The treaty gives new powers to the European Commission, the executive arm of the EU, to scrutinise national budgets and to monitor compliance with the budget rules.

Herman Van Rompuy, president of the European Council, who chaired the meeting, said the EU leaders made "important progress in our strategy to overcome the crisis and to tie our economies closer together in a stronger framework."

The fiscal treaty is "all about more responsibility and better surveillance."

It will come into force as soon as 12 euro zone nations have ratified it, he said in a press statement.

German Chancellor Angela Merkel, who strongly advocated more stringent budgetary rules to avert a repeat of the current debt crisis, expressed satisfaction over the agreement reached by the EU leaders.

"We have taken an important step towards a stability union," she told a news conference at the conclusion of the summit.

The EU leaders agreed that deficit proceedings against a member nation will come into effect automatically as soon as the annual debts exceeds 0.5 percent of the GDP.

The EU leaders also decided that future assistance for cash-strapped euro zone nations from the permanent bailout fund European Stability Mechanism (ESM) will be given only to those who signed the treaty.

The ESM will replace the present bailout fund European Financial Stability Facility (EFSF) in July.