BRUSSELS — After marathon negotiations, a group of 23 European leaders, including those from the 17 nations that use the euro, agreed to a pact with strict caps on government spending and borrowing to shore up the foundations of the currency. But the summit here fell short of winning full support of all 27 nations of the European Union.
An accord between all nations broke down in part due to British demands that sweeping new treaty changes proposed by Germany and France include protections for London from future financial regulations. The move suggested just how much anti-E.U. sentiments have grown in Britain, with London increasingly seen as an outlier in the region.
The Euro, the common currency used by 17 European nations, was born in Maastricht, Netherlands. Some residents hope it will survive the European debt crisis, but others aren't so hopeful. (Dec. 7)
An interactive look at how the European Union is structured and how the new treaty would affect the member countries.
Hungary also declined to sign on, with the Czech Republic and Sweden both requesting more time to consult their respective parliaments.
The impasse with Britain in particular effectively blocked the bid by Berlin and Paris to rewrite full European Union treaties to enshrine fiscal discipline. Instead, 23 nations in Europe, headed by Germany and France, agreed to forge their own treaty pact, including penalties for big spenders. The deal will be fleshed out in the coming months, and could be enacted faster than the more sweeping and cumbersome EU-wide accord originally sought by France and Germany.
In addition, the 23 nations agreed to increase the financial resources available to aid troubled nations in the region, pledging to make available an additional $268 billion to the International Monetary Fund. They also agreed to move up the establishment of a new $670 billion European bailout fund by one year, while keeping in place a $590 billion temporary fund, effectively enlarging the total amount available.
“We are doing everything we can to save the euro,” French President Nicolas Sarkozy said early Friday morning.
A positive view of a deal by the European Central Bank has been viewed as essential to the institution doing more to combat the region’s debt crisis, and the agreement early Friday appeared to fit the ECB’s bill. Mario Draghi, ECB head, lauded the deal as a “very good outcome for euro area members.” But stock markets in Asia were trading lower on news of the outcome in Brussels.
Nevertheless, the failure to win full approval from all EU nations appeared to be a political blow to European unity. Britain’s Prime Minister David Cameron, for instance, talked Friday morning about how thrilled he was that Britain had kept the pound, and forgone the euro, suggesting he did not feel comfortable binding his nation closer to the region in a deal that involving something as sacred as national budgets without special assurances.
“I’m afraid I cannot do that. It is not in my national interest,” Cameron said.
Leaders from the E.U. member states negotiated deep into the night, seeking to bridge differences on a pact that would set limits on government borrowing and spending that only a handful of European countries currently meet. That was seen as key to restoring confidence in European economies.