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With the package of measures now adopted, the European Council has moved to strengthen the European economic and monetary union. The level of indebtedness of member states must be reduced, and their competitiveness boosted. A permanent stability mechanism is to consolidate the euro. 

"The euro passes the test," says the Chancellor 

Speaking in Brussels, Angela Merkel declared that the extensive measures now adopted to save the euro mean that the common currency has passed an important test. The resolutions to tighten the provisions of the Stability Pact and to put in place a permanent European Stability Mechanism as of 2013 are a "political signal to markets, that the EU states intend to move even closer together," she said. 

Germany was able to push through its main demands with respect to the European Stability Mechanism (ESM).

• Assistance under the ESM will only be used if this is indispensable to stabilise the euro zone as a whole.
• All important decisions will require a unanimous vote.
• The states to be accorded assistance must agree to strict adjustment programmes (no financial assistance without major efforts on the part of the recipient state).

• Private creditors are to be involved.

Payments to be spread over a five-year period 

Germany also managed to have payments spread evenly over a period of several years. It was originally planned that Germany should pay in half of the estimated sum, of around ten million euros by 2013. Now the sum will be payable in five equal instalments as of 2013.

As of 2013, the European Stability Mechanism is to replace the temporary European Financial Stability Facility (EFSF). It is to have a total subscribed capital of 700 billion euros. In addition to guarantees worth 620 billion euros, it is to have as a sort of extra security 80 billion euros as paid-in capital. Germany is to put up around 27 percent of the ESM. To this end Germany will contribute 21.7 billion euros spread over a period of five years as paid-in capital and guarantee a sum of 168.3 billion euros.

Highly indebted euro zone states will only be granted funding as a last resort, if they are on the brink of insolvency and if the stability of the euro as a whole is jeopardised. The indebted states must also pledge to enforce cuts. And, funding from the ESM will only be forthcoming if all euro zone states agree.

The euro zone states also agreed on a Pact for Competition as well as tightening up the provisions of the Stability Pact. This is to contribute to more harmonious development of the euro states as a whole. The heads of state and government will in future agree jointly on objectives, which each country must then implement with the help of structural reforms.

In addition to the 17 euro zone member states Poland, Bulgaria, Denmark, Romania, Malta and Cyprus joined the Pact for Competition. 

More stringent discipline called for in member states’ budgets 

In the Stability and Growth Pact the European states laid down stricter provisions, so as to nip any excessive budget deficit in the bud. The financial problems currently being experienced by some euro zone states can be traced back to excessive levels of indebtedness.

With immediate effect it is not only the budget deficit that is to be taken as a criterion. The level of debt will be deemed equally important. States whose national debts exceed 60 percent of their gross domestic product will be required to reduce the debt above this level at a rate of five percent a year. This strict regulation currently also applies to Germany.

National measures to boost competitiveness

In response to a Franco-German initiative, the heads of state and government undertook in the Pact for the Euro (Euro Plus Pact), to coordinate national economic policies to a greater extent. By putting in place comparable conditions across the board, the euro zone as a whole is to become more competitive. Dangerous imbalances are to be eradicated and growth boosted, to the benefit of all. 

The Chancellor is convinced that all euro zone states must make a greater effort to become more competitive. We should not only take the best in Europe as a yardstick. We should be measuring ourselves against the best in the world, she declared.

Every year in future the heads of state and government are to enter into concrete national obligations vis à vis their opposite numbers. These will be reviewed on an annual basis, once the European Commission has assessed progress. 

The euro zone states intend to achieve the following objectives: 

• Foster competitiveness
• Foster employment
• Contribute further to the sustainability of public finances

• Reinforce financial stability.

Safety checks for European nuclear power plants

In the wake of the Japanese nuclear disaster, the EU has agreed that safety checks are to be run on European nuclear power plants. During the second half of the year, independent experts will be testing the plants to see how they would withstand earthquakes, flooding or terrorist attacks.

Chancellor Angela Merkel welcomed the stress tests agreed for nuclear power plants as a great step forward on the safety front. Checks in line with uniform standards and the publications of the results that are expected by the end of 2011 have hitherto been unthinkable. 

Renewed call on Colonel Gaddafi to step down

The European Council once again called on the Libyan leader Colonel Gaddafi to step down. He must relinquish power so that his country can make the transition to a democracy, they said. The EU also assured a “new Libya” its express political and economic support.

The Europeans are willing to impose further sanctions, declared the Chancellor. The aim is to prevent the Libyan regime generating revenue from the sale of oil and gas. 

The European Council also expressed its satisfaction at the adoption of resolution 1973 by the United Nations Security Council. The measures taken on this basis have done much to protect civilians threatened by attacks. The military operations will be ended as soon as the civilian population is safe from attack.