December 5, 2011
Under growing pressure from nervous financial markets, the leaders of France and Germany reached a difficult compromise agreement Monday to seek mandatory limits on budget deficits among debt-laden European governments as part of a revised European Union treaty.
Their accord was designed to eliminate the major cause of doubt about European financial health and respond to a barrage of questions on whether the continent’s common currency, the euro, can endure if current spending patterns continue. If adopted by other European nations, the deal would mean drastic cuts in European budgets. It would also spell the end of three decades of overspending that has helped finance a cozy social protection system envied by much of the world.
The debt limits — a “golden rule” of 3 percent of gross domestic product — would be enforced by elected leaders of the European Community acting with a supermajority of 85 percent, according to explanations provided by French President Nicolas Sarkozy and German Chancellor Angela Merkel at a joint news conference in Paris. The E.U. leaders would rule on any government cited as overspending by the European Court of Justice, they added.
The new rules would be part of a renegotiated European Union treaty that is to be completed by mid-March and ratified two months later, Sarkozy and Merkel said. The accelerated calendar was designed to show the financial markets that the 27-nation union is serious about bringing its debt problem under control once and for all.
“This package of measures is a proof of our absolute determination to guarantee a stable euro,” Merkel said.
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