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EU treads uncharted waters to defend single currency

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The European Union faced a new round of risky treaty change on Friday after its leaders agreed to embark on landmark reforms designed to fend off another financial crisis by shoring up the euro.

Less than a year after turning a page on a decade of fraught negotiations and failed referendums that ushered in the Lisbon Treaty, the bloc’s 27 leaders agreed to rewrite the rule-book in talks that dragged into the wee hours.

It was the price to pay to avoid a repeat of this year’s Greek turmoil.

But a senior diplomat warned they faced “mission impossible as there’ll be as many opinions on the subject as there are EU states.”

“This spring we overcame a deep crisis of economic and monetary union,” said EU President Herman Van Rompuy. “Our next political duty was to draw the lessons for the future, to make the European economies more crisis-proof.”

The agreement sealed under pressure from “impassioned” German Chancellor Angela Merkel endorses “limited” change to the Lisbon Treaty, which came into force last December.

Berlin, backed by Paris, demanded that the treaty be tweaked to accomodate the creation of a permanent rescue fund to help nations in financial distress, a decision also taken at the summit.

Europe’s biggest economy contributed the lion’s share of eurozone commitments to an existing 440-billion-euro European Financial Stability Fund (EFSF), hastily set up in May to save Greece, but which the EU 27 now want turned into a “permanent crisis mechanism.”

But the Lisbon Treaty bans members from bailing each other out and Merkel consequently feared Germany’s powerful constitutional court would throw a spanner in the new EU financial works.

“The euro has emerged strengthened,” a defiant Merkel said after emerging from seven arduous hours of talks with an agreement to establish the fund safeguarding the financial stability of the euro area as a whole.

Van Rompuy will now undertake consultations to legally underpin the rescue fund, with more talks set for a December summit and a final decision on “light” treaty change to come into force by mid-2013.

That is the expiry date for the existing EFSF set up to reassure markets in the aftermath of the Greek crisis.

But diplomats warned before the ink was dry that the road even to light change could be rocky.

The EU 27 are hoping a rewrite can be concluded via a quick and easy procedure that bypasses the European parliament and closes the door on member states who come knocking with wish-lists of their own to re-open chapters of the treaty.

“We don’t want to reopen the treaty,” said Van Rompuy.

However, warning lights went on even before the summit deal was clinched when “several delegations showed up with shopping lists in exchange for their agreement,” said one diplomat.

British Prime Minister David Cameron demanded the EU squeeze its spending while Poland came demanding its pension costs be deducted from its debt.

Some states also fear referendums in places like Austria or Ireland, whose Prime Minister Brian Cowen said it was “too early” to call, could unleash unintended damage.

Already both houses of parliament in London would have to ratify a change.

Last year the euro-sceptic Czech president held up Lisbon by refusing to sign.

Another German demand, also backed by France, for a suspension of voting rights for repeated debt and deficit offenders, was essentially buried.

France and Germany had upset their EU partners by issuing joint demands ahead of the summit in a move decried by many as a “diktat.”

“It’s clear that not all member states appreciated this,” said the head of the group of eurozone finance ministers, Jean-Claude Juncker.

“Several Franco-German proposals failed to be carried,” he added. “So you can’t say everyone succumbed and fell into line with France and Germany.”

Source: AFP

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