EU summit delivers budget, growth pacts; Greek woes remain

By Alvise Armellini and Alexandra Mayer-Hohdahl Jan 30, 2012, 23:21 GMT

Brussels - A European Union summit produced deals Monday on a budget discipline pact and a plan to combat rising unemployment, but not on how to handle Greece's near-bankrupt state or ease recurring fears about a debt-crisis contagion to Italy and Spain.

EU President Herman Van Rompuy said 25 of the bloc's 27 member states had signed up to the budget pact, known as the fiscal compact. The Czech Republic joined Britain in staying out of the agreement due to 'constitutional reasons,' French President Nicolas Sarkozy said.

European Commission President Jose Manuel Barroso noted that the pact 'will remain open to all.' German Chancellor Angela Merkel, who had pushed hardest for the measure, described the three-month turnaround on the pact as 'a real masterstroke.'

The most significant innovation brought in by the treaty is an obligation to keep a balanced budget, with national legal provisions enforcing the rule to be policed by the EU Court of Justice.

Its approval had been held up by Poland's insistence that non-euro signatories should not be kept out of regular eurozone summits - another innovation introduced by the pact.

The compromise worked out by Van Rompuy was to agree on different formats for summits on economic matters - featuring 27, 25 or 17 member states - depending on the subject matter.

'This doesn't mean that there are several speeds. It doesn't mean that there are countries which will be left aside. To the contrary,' Sarkozy said. 'It means that there are degrees of European integration, ... and that everyone chooses freely.'

Monday's summit took place against a backdrop of continued uncertainty over debt forgiveness talks in Greece, record high risk premia on Portugal's bonds, EU-wide recession worries and rising unemployment, despite reduced market pressure on Italy and Spain.

In a bid to assuage fears about the eurozone's future, leaders gave final approval to bring forward to July the launch of the 500-billion-euro European Stability Mechanism (ESM), the new eurozone bailout fund.

They did not speed up decisions on combining the ESM with the temporary European Financial Stability Facility (EFSF), which would create a 750-billion-euro safety net.

The International Monetary Fund said this week such a move would help shield Italy and Spain.

'As agreed in December, we will reassess in March the adequacy of resources under the EFSF and ESM,' euro area leaders said in a separate statement.

After securing what it wanted on the fiscal compact, Germany will eventually give in on the bailout question, Monti predicted: 'Yes, we see (the evolution in Germany's stance), we feel it and for sure you will have noticed, too.'

Monday's summit had been billed as a chance to move the EU away from an austerity-only response to its crisis with the approval of new plans on jobs and growth.

While stopping short of increasing overall resources, leaders agreed that existing regional aid and social development money that the EU makes available to member states should be 'better' targeted 'towards jobs and growth, within agreed ceilings.'

Up to 82 billion euros (108 billion dollars) are available for reallocation, including 4.3 billion euros for troubled Greece, the EU commission said.

In comments published on Twitter, Barroso said he would prod the eight EU members with the highest youth unemployment rates - Spain, Greece, Slovakia, Latvia, Italy, Portugal, Lithuania and Ireland - to get their acts together.

'I will be writing to the prime ministers of these eight countries to propose that we start work immediately,' he wrote.

Van Rompuy echoed other EU officials by noting that 'stimulating employment is mostly a responsibility for the individual countries.' Leaders committed themselves to adopt national job plans, while EU-level measures are to be reviewed at a summit in June.

They also pledged to: help small and medium-sized enterprises; boost trade, notably with the United States; update EU copyright rules to kick-start the digital economy; and settle a Franco-German-British row holding up an EU patent system.

Swedish Prime Minister Fredrik Reinfeldt was the only EU leader to duck out of the seven-page declaration, saying he needed parliamentary clearance before endorsing it.

The seven-hour summit seemed unaffected by a 24-hour general strike in Belgium - the first in 18 years - to protest EU-mandated budget cuts.

'Enough is enough. We want them to change their policies,' Claude Rolin, leader of the Belgian Christian trade union CSC, said outside EU headquarters. 'Up in their helicopters, they will see a country paralysed because of their blind policies.'