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Together the euro zone states aim to coordinate their national economic policy in future, for instance, tax rates, unit labour costs, and old age pension and social policy. The governments of these states will decide in detail how and in which areas at a special summit meeting to be held in mid-March.

The President of the European Council Herman Van Rompuy is to draw up proposals for the next meeting. The concept of common economic governance is then to be part of an overall reform of the currency union. Experts will be working in parallel on various details of the permanent stability mechanism already agreed on for the common currency.

No new competence for Europe

 

"We will have to adapt our structures so that we all move in the same direction," underscored Angela Merkel. There will also be points on which Germany has to do more, such as promoting innovation.

 

Last December the Council of the 27 EU member states agreed to work more closely in the field of economic policy. This plan is now taking shape. Alongside fiscal and social systems, it will embrace comparable financial structures and harmonised labour markets. When standards are drawn up the partners intend to take their lead from the best member of the community in each instance.

 

Angela Merkel stressed that the decision in favour of common economic policy does not mean any new competencies being delegated to Europe. It is a question of coordinating decisions, all of which will have to be approved by the national parliaments

 

Competitive states, innovative industries

 

In only one year the new pact is to produce results, promised the Chancellor and French President Nicolas Sarkozy. The long-term goal is to ensure that Europe and the euro zone states remain some of the most competitive areas in the globalised world.

 

2010 was a year of challenges for the euro. 2011 should bring new international confidence in the common currency, said Angela Merkel. "The euro is more than just a currency – it is also a political project," she said.

 

Support for Egypt 

 

The heads of state and government unanimously condemned all forms of violence during the current events in Egypt. At the same time they emphasised that the Egyptian people have a right to self-determination and to express their opinion freely.

 

The Chancellor announced that the EU would like to establish a new partnership with the region. Europe is determined to support political reforms in the Arab states to the best of its ability. To this end the High Representative of the Union for Foreign Affairs will soon be travelling to Egypt.

 

Angela Merkel stated clearly that it is not a question of intervening in the domestic policy dialogue within a state. The Europeans are however, pushing for human values and principles to be respected.

 

At the same time the European Council advocated that the Middle East peace process should be resumed, particularly given the current situation.

 

Draft internal energy market

 

That morning the heads of state and government also discussed the future energy policy of the community. On the basis of the energy strategy towards 2020 submitted by the European Commission, the EU is aiming to put in place an EU-wide energy market, with competitive prices and secure supplies, and without any protectionism.

 

A key role will be played by the expansion of the electricity grids. The new infrastructure that will be required will mean investing billions, which the energy providers cannot do. For this reason, the EU will shoulder part of the costs.

 

New technology will be needed, for instance to transport the power generated from wind power and hydro-power in the northern regions of the EU to the southern regions. The Europeans also plan to improve energy efficiency in many areas, and ensure energy savings on a massive scale.