EU treaty draft: Bailouts only offered to countries that ratify budget pact


“The granting of assistance in the framework of new programmes under the European Stability Mechanism [ESM] will be conditional, as of March 1, 2013, on the ratification of this treaty,” according to the draft, seen 11 days before an EU summit due to approve the document.

Negotiators working on a pact to be signed by 26 of the 27 European Union states – with Britain remaining odd man out – toughened up the treaty in many respects ahead of planned talks between finance ministers from all 27 states, including Britain, late on Monday in Brussels.

The text spells out for the first time that no loans will be made to governments that refuse to sign up to the pact obliging states to adhere to broadly balanced budgets – allowing only minor deficits, and this only in exceptional circumstances.

The clause linking any rescue to a signature directly affects Ireland, which along with Greece and Portugal, is already under bailout assistance from euro currency partners.

Irish Prime Minister Enda Kenny would normally be required to hold a referendum to pass a new treaty.

But after the Irish people voted against the EU’s Lisbon Treaty in 2008, with a second poll required to get it through the next year, none of his EU partners want to take that risk.

Irish press reports say that Kenny can only determine whether a referendum is required once the treaty text is agreed at EU level.

Verbal acceptance is due at a January 30 summit, followed by a signing at a March 1 to March 2 meeting.

Negotiators may be giving Dublin something to work with by softening the degree of legal certainty required for a so-called “golden rule” obliging balanced budgets that France and Germany originally wanted written into national constitutions.

Now, the draft says that this legal inscription should be “preferably constitutional” but could also be “otherwise guaranteed to be respected throughout the national budgetary processes.”

This was a key Danish demand also. Voters there rejected a previous Maastricht Treaty in a 1992 referendum, as well as the euro in a 2000 poll.

The slight easing of the legal straitjacket on the pact’s core provision is offset by a toughening of the conditions that can trigger penalties.

Returning to an earlier draft theme, individual countries would be able to take those that do not adopt the golden rule sufficiently to the European Court of Justice.

The Luxembourg-based court could then divert a financial penalty worth up to 0.1pc of the guilty state’s gross domestic product (GDP) to the ESM, the new €500bn bailout fund due to enter force in July.

Germany, the biggest contributor to bailouts and a promoter of strict fiscal discipline, has insisted on handing the court a meaningful role in policing budgets.

The new draft holds out the prospect that non-eurozone countries who ratify the treaty will also be invited “at least once a year” into the bi-annual eurozone summits.

This was a key demand for Poland, which intends taking up the currency some time after 2015 but wants to help shape its policies even before then.

Many of the more punitive aspects of the pact currently being negotiated will only apply to the 17 states in the eurozone.

The new head of the European Parliament – Germany’s Martin Schulz – may also be invited in.

The treaty as it stands will come into effect once 12 adherents ratify it – some say this is not enough.

The Telegraph,