31 Jan 2012

EU fiscal deal backed by 25 members

8:51 pm on 31 January 2012

Twenty-five of the 27 European Union countries agreed on Monday to sign a fiscal pact at a summit in Brussels.

The Czech Republic and Britain are the only members not to sign the agreement, which sets stricter budgetary rules to prevent future debt crises.

The Czech Republic - which is not yet in the euro - cited constitutional reasons for not signing. Britain last month used its veto to opt out of the treaty.

Under the agreement, sanctions will be imposed on countries that breach EU budget deficit limits.

Signatories will also have to enact balanced budget rules in their national laws.

Under the treaty the European Court of Justice will be empowered to monitor compliance and impose fines on rule-breakers.

The accord has been welcomed by the European Central Bank, which has long pressed eurozone governments to put their houses in order.

The BBC reports that Germany, as the eurozone's biggest lender and most powerful economy, was particularly keen to get a binding treaty adopted to enforce budget rules.

German Chancellor Angela Merkel says she hopes the new rules will ensure there can never again be a repeat of the debt crisis that has engulfed the eurozone for the past two years.

But Britain's Prime Minister, David Cameron, doubted the fiscal pack on its own would be enough to help countries like Greece, Italy and Spain compete in the eurozone.

The EU leaders meeting also discussed ways of stimulating economic growth despite the imposition of stringent austerity budgets and measure to reduce the numbers of those out of work.

In a statement on economic growth issued afterwards, they noted that cutting budget deficits was not in itself sufficient.

"We have to modernise our economies and strengthen our competitiveness to secure sustainable growth," the statement said.

Unemployment averages 10% across the eurozone with the youth unemployment rate often much higher.