Herman Van Rompuy, president of the European Council, defends the decisions made by the majority of euro area leaders at the December 9 summit, while acknowledging the negotiation of an intergovernmental treaty to make the fiscal compact binding “will not be easy”.
Herman Van Rompuy, president of the European Council, defends the decisions made by the majority of euro area leaders at the December 9 summit, while acknowledging the negotiation of an intergovernmental treaty to make the fiscal compact binding “will not be easy”.
“I want to report to you today on the main outcomes of last week’s European Council. As you know, the main focus was on the future of the eurozone. It is a long route.
“Restoring confidence is more difficult than most of us expected. It has taken huge efforts to remedy the weak infrastructure provided by the Maastricht Treaty and to correct the policies of the past.
“At this meeting, there was, on the one hand, a remarkable degree of consensus on the content and objectives. This agreement on the substance was moreover supported not only by the Eurozone members, but also by the future Eurozone members. On the other hand, there was more discussion on the legal instruments than necessary.
“Allow me to start with the former, lest it be overlooked because controversy about the latter. First, for the short term, we agreed on immediate action to help overcome the current difficulties. We are increasing our financial resources to address the crisis we face.
“Eurozone and other Member States will aim to make available additional resources of up to €200bn to the IMF. The leverage of the European Financial Stability Facility will be rapidly deployed and the European Central Bank will act as its agent in market operations.
“The entry into force of the European Stability Mechanism (ESM) rescue fund will be accelerated so that it can start in July 2012. We will review in March the overall adequacy of the overall EFSF/ESM ceiling of €500bn.
“As regards the Private Sector Involvement, the major change to our doctrine that we decided on 21 July will now be translated into the ESM Treaty. Or to put it more bluntly: our first approach to PSI, which had a very negative impact on the debt markets, is now officially over. From now on we will strictly adhere to the IMF principles and practices.
“Second, as regards the medium and longer-term, we agreed on a new fiscal compact with new fiscal rules. Member States will transpose it into their national legislation at constitutional or equivalent level. Our rules on excessive deficit procedure will become more automatic for the euro area members.
“Key elements of this new approach are the following: building on the Stability and Growth Pact, budgets must be balanced in structural terms (that is, over the economic cycle); this rule must be defined at treaty level and incorporated into national rules; automatic adjustment mechanism to ensure correction in case of deviation must be defined by Member States, on the basis of principles proposed by the Commission.
