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Photo: REGIERUNGonline/Steins Setting the scene for a new Europe

The Brussels summit and the decisions made with respect to a fiscal compact have set the scene for a new Europe, said Angela Merkel. The euro-zone states will proceed to remedy the structural shortcomings in the economic and currency union. There can be no turning back now. There is no swift and easy solution – the process will take years. But, the euro-zone states have made the necessary decisions.

17 Plus Agreement

Moves to amend the European treaties failed because the United Kingdom refused its support. That is why now at least the 17 euro-zone states will now enter into a new international agreement. The new stronger foundation for the union is to be finalised by March 2012.

Then the national parliaments will be called on to ratify the agreement. The European Commission and the Court of Justice will be given an important role. The European Parliament will be involved from the outset.

Open to all EU member states

The agreement will be open to all EU member states and is to become part of the EU framework. The Chancellor said, "What is important is not the duration, but the fact that we do not give up in the face of setbacks." The economic and currency union must be completed and the original errors remedied, she continued. "Then Europe will emerge stronger from the crisis than before."  The scene has been set for a Europe that projects stability, solidarity and confidence.

The measures

The euro-zone states have significantly increased the capacity of the provisional European Financial Stability Facility (EFSF). The permanent European Stability Mechanism (ESM) is to be brought forward to 2012.

All states will then have to pay into the facility in 2012. This should strengthen its credibility. The total volume of the ESM will be 500 million euros.

The International Monetary Fund will be given an appropriate level of funding of another 200 billion euros. Tight conditions will be attached to the funds.

The private sector is to be involved. All new loans will contain debt rescheduling provisions, known as Collective Action Clauses (CAC).

When urgent decisions are to be made regarding the ESM, a majority representing 85 percent of the capital will be needed to pass a motion. 

Crisis prevention

The signatory states to the new agreement must stick to the rules, or accept the consequences.

• All states are to introduce a legal cap on new debt, preferably enshrined in the constitution, with a view to balancing public budgets. A budget will be deemed to be balanced if the deficit does not exceed 0.5 percent of the GDP of the country in question. The Court of Justice will be entitled to review the correct translation of the European debt cap into national law.
  
  
• In future the EU will automatically be able to impose sanctions on countries with excessively high budget deficits. Only a qualified majority of the euro-zone states will be able to vote to prevent sanctions. A reverse qualified majority thus applies.
  
  
• Countries with excessively high debt levels are to enter into legally binding reform agreements with the European Commission.

The United Kingdom to remain an important partner in the EU

Angela Merkel expressed her regret that the United Kingdom would not be part of the new system. There can be no question, however, but that the United Kingdom will remain an important partner in the European Union. The UK is a reliable partner in the fields of foreign and security policy, competitiveness, the single market, commerce and climate change mitigation, she said.