Eurozone deal on Greece renews EU constitutional reform talk (Roundup)

Mar 26, 2010, 15:45 GMT

Brussels/Frankfurt - The deal reached between eurozone leaders to help Greece face its debt crisis boosted confidence in the euro on Friday, but left European Union leaders arguing over the necessity of legal changes in the way their bloc is governed.

As well as pledging bilateral loans for Greece in case it fails to find buyers for its government bonds, eurozone states agreed to tighten vigilance amongst themselves, so that no other country would be allowed to sink into an economic mess similar to Athens'.

Markets seemed to welcome Thursday's deal. At the start of trading Friday, the euro rose 0.7 per cent to 1.3364 dollars. Earlier in the week it had sunk to its lowest level in 10 months.

But British Prime Minister Gordon Brown made it clear that the Greek decision, which does not involve non-eurozone member Britain, should not result in the EU acquiring more powers.

'None of these arrangements would see any powers being ceded from Britain to the European Union,' he declared on Friday, at the end of a two-day EU summit.

Brown added that calls from German Chancellor Angela Merkel for EU treaty changes to enforce stricter budgetary rules within the eurozone were out of the question.

'I did say exactly this to Chancellor Merkel ... we do not want to see ... institutional and constitutional changes ... over the next few years,' Brown said.

Despite that warning, Merkel stuck to her line.

'We won't be able to get away without changing the treaty,' she told reporters.

French President Nicolas Sarkozy also displayed little enthusiasm for tinkering with the EU's institutional set-up after the last changes, enacted in December, took almost ten years to be agreed.

'We do not necessarily need a change of the treaties' to have better enforcement of economic rules, he said, stressing that unanimity was needed.

'We will work on it and we are not excluding any possibility. It is a real problem,' Sarkozy added.

Merkel, whose coalition is also facing a crucial regional electoral test in early May, is keen to reassure German voters that the Greek decision would not open the door to any German-funded bail- out of other financially precarious eurozone countries, such as Portugal.

However, Baltic states recalled that Germany itself - along with France - contributed to the current crisis by pushing to water down the euro's original strict fiscal discipline in 2005, after it emerged that they had broken the rules themselves.

It was a 'mistake,' Lithuanian President Dalia Grybauskaite told the German Press Agency dpa.

'The (euro) sanctions should be renewed, because they were there for some time but then it was changed,' Latvian Premier Valdis Dombrovskis added.

To accommodate German requests, EU leaders agreed that, in addition to forthcoming proposals by the commission on strengthened economic coordination between eurozone states, a 'task force' would be set up to seek 'an improved crisis resolution framework and better budgetary discipline.'

The panel, involving EU governments, the European Commission and the European Central Bank (ECB), is expected to report back before the end of the year, and was asked to explore 'all options to reinforce the legal framework.'

But the EU's president, Herman Van Rompuy, indicated that formula did not necessarily imply a contentious constitutional reform.

'If there is no consensus for treaty changes, we will not make proposals,' he said.