A summit of deals and divisions

WHAT THEY AGREED

The inter-governmental treaty will set out stricter rules for a ‘fiscal compact', described by leaders of eurozone member states as a “significantly stronger co-ordination of economic policies in areas of common interests”.

Budgets must be balanced or in surplus with the annual structural deficit not exceeding 0.5% of gross domestic product (GDP), to be introduced in national constitutions and verified by the European Court of Justice.

Countries in excessive deficit procedure must submit to the Commission and Council a plan detailing structural reforms.

As soon as a member state is in breach of the deficit-to-GDP ratio of 3% (as set out in the stability and growth pact), sanctions will be imposed unless a qualified majority of eurozone member states block the process.

Member states will “examine swiftly” proposals made by the Commission on 23 November on monitoring of national budgets by the Commission and other eurozone member states before they are passed to national parliaments. Closer monitoring of budgets of countries subject to an excessive deficit procedure will be introduced.

Summits of leaders of eurozone member states are to be held at least twice a year.

ARTICLE 126

The existing article 126 of the treaty on the functioning of the European Union requires the European Commission to monitor the deficit and debt of each member state. On advice and recommendations from the Commission, the EU's member states – through the Council of Ministers – decide whether an excessive deficit exists, what remedial action to recommend, and whether to impose sanctions in the event of non-compliance. Those Council decisions are taken by a qualified majority of all other member states.

Germany in particular wanted article 126 to be changed so that Commission recommendations would apply unless there was a qualified majority of member states against the proposal.

Changing the EU's treaties was not, in the face of the UK veto, a practical option, so eurozone member states and at least five other countries now intend to conclude a treaty among themselves. The only difference is that the Commission will not be able to make proposals on countries in breach of the rules; this would have to come from other member states.

The parties to the inter-governmental treaty can, according to article 273 of the treaty, agree among themselves that the European Court of Justice will have jurisdiction over their treaty.