Friday, December 9, 2011

EU leaders reach debt crisis deal without Britain

A divided Europe – a historic rift over building a closer fiscal union to preserve the euro, with a large majority of countries led by Germany and France agreeing to forge ahead with a separate treaty, leaving Britain isolated – reached a new deal to address the debt crisis hovering over the block.

Twenty-three of the 27 leaders agreed to pursue tighter integration with stricter budget rules for the single currency area, but Britain said it could not accept proposed amendments to the EU treaty after failing to secure concessions for itself.

After 10 hours of talks, all 17 members of the euro zone and six countries that aspire to join resolved to negotiate a new agreement alongside the EU treaty with a tougher deficit and debt regime to insulate the euro zone against the debt crisis.

"Not Europe, Brits divided. And they are outside of decision making. Europe is united," Lithuanian President Dalia Grybauskaite said in blunt English on arriving for the second day of the bloc's eighth crisis summit this year.

One senior EU diplomat called British Prime Minister David Cameron's negotiating tactics "clumsy".

European Central Bank President Mario Draghi called the decision a step forward for the stricter budget rules he has said are necessary if the euro zone is to emerge stronger from two years of market turmoil.

"It's going to be the basis for a good fiscal compact and more discipline in economic policy in the euro area members," Draghi said. "We came to conclusions that will have to be fleshed out more in the coming days."

German Chancellor Angela Merkel said she was very satisfied with the decisions. The world would see that Europe had learned from its mistakes and avoided "lousy compromise", she said.

Merkel and French President Nicolas Sarkozy had wanted to get the whole EU to agree to change the Lisbon treaty so that stricter budget and debt rules for euro zone states could be enshrined in the bloc's basic law.

But Britain, which is outside the euro zone, refused to back the move, saying it wanted guarantees in a protocol protecting its financial services industry, roughly one-tenth of the country's economy. Sarkozy described Cameron's demand as unacceptable.

Cameron hinted London may try to prevent the others from using the executive European Commission and the European Court of Justice, saying: "Clearly the institutions of the European Union belong to the European Union, they belong to the 27."

Nine countries are ready to join the 17 members of the euro zone to draft a new intergovernmental treaty for deeper fiscal union aimed at tackling the sovereign debt crisis.

The decision appears to isolate Britain even more markedly as the only one of the 10 non-euro-zone countries in the EU not to agree to join the treaty change.

"The Heads of State or Government of Bulgaria, Czech Republic, Denmark, Hungary, Latvia, Lithuania, Poland, Romania and Sweden indicated the possibility to take part in this process after consulting their Parliaments where appropriate," said the draft conclusions.