Thursday

15th Nov 2018

EU leaders agree to tweak treaty, keep bail-out fund unchanged

  • Juncker (l) said there was no agreement to increase the size of the fund (Photo: consilium.europa.eu)

European Union premiers and presidents have agreed to a surgical change to the bloc's treaty to enable the creation of a permanent bail-out fund from 2013 but have left the size of the existing fund unchanged.

"The member states whose currency is the euro may establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro area as a whole. The granting of any required financial assistance under the mechanism will be made subject to strict conditionality," reads the two-line amendment to the Lisbon Treaty agreed late on Thursday evening (16 December).

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The change has been crafted to be as simple as possible so that it can be approved by a simplified amendment procedure that only requires unanimity at EU-leader level, short-circuiting the need for referendums in any member state. The last major changes to the EU treaty were completed only last year after 10 years of ratification and referendum battles.

European Commission President Jose Manuel Barroso said the changes will be enough to convince the markets the euro project is safe.

"Our task now is to hold the course, walk not talk, and prove those wrong who predicted the demise of our common currency," he told reporters in Brussels.

Leaders did not agree to boost the size of the existing €440 billion bail-out fund set up to rescue member states burdened with massive public debts between now and 2013, however.

Luxembourgish Prime Minister and the chair of the eurozone group of states, Jean-Claude Juncker, had strongly advocated such a move.

"The decision tonight was that there will be no enlargement and deepening of the volume" current bail-out fund, he said. Mr Juncker added that an increase in the pool of cash available in the current rescue fund "will be taken under consideration in the next coming weeks."

Although the two-line treaty amendment makes no mention of requirements that investors contribute in some way to any bail-outs, EUobserver understands the leaders are set in future to back plans to impose such haircuts on a "case-by-case" basis.

Mr Juncker had in the run-up to the summit also called for the issuance of binds at the European level but the idea was struck down by Germany, which feared it would be saddled with increased borrowing costs as a result of an integrated bond market.

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