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Eurozone crisis: New EU treaty 'may not be needed' Eurozone crisis: New EU treaty 'may not be needed'
(40 minutes later)
Tougher rules to tackle the eurozone debt crisis can be achieved without changing EU treaties, EU Council President Herman Van Rompuy says.Tougher rules to tackle the eurozone debt crisis can be achieved without changing EU treaties, EU Council President Herman Van Rompuy says.
In a leaked report for a crucial EU summit beginning on Thursday, he offers a fast-track "fiscal compact" that does not need lengthy ratification by parliaments or national referendums.In a leaked report for a crucial EU summit beginning on Thursday, he offers a fast-track "fiscal compact" that does not need lengthy ratification by parliaments or national referendums.
Germany and France are pushing for a new EU treaty by March, saying stricter rules should be enshrined there.Germany and France are pushing for a new EU treaty by March, saying stricter rules should be enshrined there.
The US has backed their plans.The US has backed their plans.
But Treasury Secretary Timothy Geithner said the US Federal Reserve had no plans to give money to the International Monetary Fund to boost the eurozone's bailout fund.But Treasury Secretary Timothy Geithner said the US Federal Reserve had no plans to give money to the International Monetary Fund to boost the eurozone's bailout fund.
Mr Geithner, who is meeting all major eurozone leaders during his three-day visit of Europe, stressed that more action was needed to boost economic growth in Europe, alongside the longer-term reforms. He meets President Nicolas Sarkozy in Paris on Wednesday.Mr Geithner, who is meeting all major eurozone leaders during his three-day visit of Europe, stressed that more action was needed to boost economic growth in Europe, alongside the longer-term reforms. He meets President Nicolas Sarkozy in Paris on Wednesday.
Battlelines drawn 'Negative implications'
Mr Van Rompuy will be chairing the two-day summit, and all the signs are that it could be a bruising affair, the BBC's European affairs correspondent Chris Morris reports.Mr Van Rompuy will be chairing the two-day summit, and all the signs are that it could be a bruising affair, the BBC's European affairs correspondent Chris Morris reports.
In the report, details of which have been obtained by the media, Mr Van Rompuy proposes a plan aimed at agreeing a "new fiscal compact" without holding a referendum or ratification by the parliaments of each eurozone country. In the interim report, details of which have been obtained by the media, Mr Van Rompuy proposes a plan aimed at agreeing a "new fiscal compact" without holding a referendum or ratification by the parliaments of each eurozone country.
The draft says that tougher fiscal reforms can be adopted simply by amending a protocol - a procedure that needs national consensus but does not require substantial changes to the EU treaties.The draft says that tougher fiscal reforms can be adopted simply by amending a protocol - a procedure that needs national consensus but does not require substantial changes to the EU treaties.
This, Mr Van Rompuy argues, would speed up the implementation of reforms and remove any potential political complications.This, Mr Van Rompuy argues, would speed up the implementation of reforms and remove any potential political complications.
The main aims are to ensure that each eurozone member keeps its budget deficit below 3% of GDP, its debt under 60%, and a "golden rule" should be enshrined into national legislation to guarantee a balanced budget in the medium-term. The political battle lines are being drawn up before this week's summit, and all the signs are that it could be a bruising affair.
Mr Van Rompuy's report also proposes to give the eurozone bailout fund a banking licence, so it can borrow money directly from the European Central Bank. Some of Herman Van Rompuy's proposals tally with what we know of the Franco-German plan - others don't.
And the European Commission should have the power to impose austerity measures automatically on countries which require bailouts. He suggests the rules could be toughened up in the first instance without actually changing treaties at all - which would remove many political complications.
But France and Germany appear to want to push through more radical measures.
And if all 27 EU member states can't agree, then they are prepared to work towards a new treaty outside EU structures, involving the 17 members of the eurozone and any other country that wants to join.
The interim report contains the following key provisions:
  • Each eurozone member's budget deficit should be below 3% of GDP and national debt under 60%
  • A "golden rule" should be enshrined into national legislation to guarantee a balanced budget in the medium-term
  • The eurozone bailout fund to be given a banking licence to borrow directly from the European Central Bank
  • The European Commission to have the power to impose austerity measures automatically on countries which require bailouts
However, Mr Van Rompuy acknowledges that more far-reaching reforms would eventually require a change in EU treaties.However, Mr Van Rompuy acknowledges that more far-reaching reforms would eventually require a change in EU treaties.
Some of the report's proposals tally with the Franco-German plan how to tackle the crisis, but some do not.Some of the report's proposals tally with the Franco-German plan how to tackle the crisis, but some do not.
Paris and Berlin appear to be pushing through more radical measures, our correspondent says, and if all 27 EU members cannot agree, then they are prepared to work towards a new treaty involving the eurozone bloc and any other country that wants to join.Paris and Berlin appear to be pushing through more radical measures, our correspondent says, and if all 27 EU members cannot agree, then they are prepared to work towards a new treaty involving the eurozone bloc and any other country that wants to join.
Crisis jargon buster Use the dropdown for easy-to-understand explanations of key financial terms:
AAA-rating The best credit rating that can be given to a borrower's debts, indicating that the risk of borrowing defaulting is minuscule. Glossary in full
Such a move could leave Britain - a non-eurozone EU member - feeling more isolated, he says.Such a move could leave Britain - a non-eurozone EU member - feeling more isolated, he says.
UK Prime Minister David Cameron has said he will not sign a new treaty without safeguards for to protect financial interests of the City of London and Britain's role in the European single market.UK Prime Minister David Cameron has said he will not sign a new treaty without safeguards for to protect financial interests of the City of London and Britain's role in the European single market.
But such is the depth of the crisis surrounding the eurozone that the main focus is not on the EU solidarity but on restoring market confidence in whatever way proves possible, our correspondent says.But such is the depth of the crisis surrounding the eurozone that the main focus is not on the EU solidarity but on restoring market confidence in whatever way proves possible, our correspondent says.
Earlier this week, Standard & Poor's put all eurozone nations on credit watch "with negative implications".Earlier this week, Standard & Poor's put all eurozone nations on credit watch "with negative implications".
The ratings agency said the decision was prompted "by our belief that systemic stresses in the eurozone have risen in recent weeks to the extent that they now put downward pressure on the credit standing of the eurozone as a whole".The ratings agency said the decision was prompted "by our belief that systemic stresses in the eurozone have risen in recent weeks to the extent that they now put downward pressure on the credit standing of the eurozone as a whole".