3 Mar 2012

Fiscal treaty signed in Brussels

1:30 pm on 3 March 2012

A new treaty to enforce budget discipline within the European Union was signed in Brussels on Friday by 25 members of the bloc.

The fiscal compact aims to prevent the 17 eurozone states running up huge debts like those which sparked the Greek, Irish and Portuguese bailouts.

To take effect, it must be ratified by 12 eurozone states. Only Britain and the Czech Republic have not signed.

Eurozone countries will scrutinise each other's budgets and the European Court of Justice will be able to check whether nations stick to the rules.

The BBC reports the fiscal compact will now go before national parliaments and, in the case of the Irish Republic, a referendum.

Critics argue that the fiscal treaty is mainly a political gesture aimed at reassuring taxpayers in Germany, where there is reluctance to pay for further eurozone bailouts.

Germany is reluctant to increase the size of the European Stability Mechanism, which comes into force on 1 July.

The BBC reports a decision on its size has been put off until the end of March. There are calls to combine the 250 billion euros left in the temporary bailout fund, the EFSF, with the ESM (500 billion euros).