- debt - European Union - eurozone
Doubt lingers despite EU rescue fund deal
The European Union’s last summit for 2010 closed Friday, leaving some members with lingering doubts over the bloc’s economic future. Leaders reached however an agreement to set up a permanent mechanism to stave off future sovereign debt crises.
AFP - European Union leaders on Thursday agreed on a change in the bloc's rule-book, the Lisbon Treaty, enabling the creation of a permanent rescue fund for eurozone countries in crisis, a diplomatic source said.
"There is an agreement on the text on treaty change," the source said.
The modification to the treaty will allow the 16 eurozone nations -- soon to be 17 with Estonia joining on January 1 -- to fly to the rescue of one another if necessary through a permanent backstop fund to be established in 2013.
The agreement stipulates that "member states whose currency is the euro may establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro as a whole."
But help will only be granted if the country in trouble agrees to take measures to redress its debt or deficit, the statement adds.
"The granting of any required financial assistance under the mechanism will be made subject to strict conditionality," it says.
The agreement came as the bloc's 27 leaders, meeting at a Thursday and Friday summit in Brussels, moved to shore up the euro amid market fears of a fresh debt crisis engulfing Portugal and Spain.
The milestone deal in the history of the single currency, which entered circulation in 1999, aims to stabilise the euro and shelter eurozone countries from the turbulence that this year saw EU nations step in successively to bail out first Greece, then Ireland.
"We all share the same objective: to ensure a stable Europe and currency," German Chancellor Angela Merkel said as she walked into talks.
The future euro crisis umbrella was a "big piece of solidarity between the states that share the euro," she said.
Europeans came under criticism for not acting quickly enough to bail out Greece, adding pressure to already jittery markets in the fallout from the global financial crisis.
A temporary backstop fund was set up in May worth 750 billion euros (nearly a trillion dollars) but with a three-year lifespan.
But the move failed to stave off financial pressure on euro-nations saddled with high deficits and debt, leading to moves to establish a permanent crisis fund as well as establish a set of rules to tighten surveillance and sanction spendthrift behavior.
There have also been calls for common economic governance of the eurozone.
Greek Prime Minister George Papandreou, whose government was forced to implement deeply unpopular austerity measures in return for a 110-billion-euro bailout in May, said all of Europe now had to act together.
"The challenge today is not what we as member states or nations are doing to shore up our (individual) economy, the challenge is a collective one now," he said.