The European Union said Friday that 26 of its 27 member countries are open to joining a new treaty tying their finances together to solve the euro crisis. Only Britain remains opposed, creating a deep rift in the union.
In marathon talks that lasted all night and into Friday, leaders of the 17 countries that use the euro gradually persuaded nearly all the other EU nations to consider joining the new treaty. Some countries may face parliamentary opposition to the pact, which would allow for unprecedented oversight of national budgets.
Stocks and the euro climbed on the news of the new treaty, even though it offers only a long-haul solution and leaves many details still to be solved. It offered new confidence in European nations' commitment to each other and willingness to surrender sovereignty to quell a crisis that started in Greece, engulfed the whole eurozone and now threatens the global financial system.
"This is the breakthrough to the stability union," German Chancellor Angela Merkel said at the end of the summit. "We are using the crisis as an opportunity for a renewal."
A document released near the end of the high-stakes summit said the leaders of nine of the 10 EU countries that don't use the euro "indicated the possibility to take part in this process after consulting their parliaments where appropriate." The leaders want the new treaty written by March.
In drafting a new treaty, the countries hope to help European nations struggling with giant debts over the long term, and in that sense there were early indications of success. Such an agreement is considered necessary before the European Central Bank and other institutions commit more money to lowering the borrowing costs of heavily indebted countries like Italy and Spain.
"It's a very good outcome for the euro area, very good," ECB President Mario Draghi said in Brussels. "It is going to be the basis for much more disciplined economic policy for euro-area members. And certainly it is going to be helpful in the present situation."
Europe's 'fiscal compact'
The key points of Europe's new financial treaty include:
- Countries must amend their constitutions to include a balanced budget provision.
- A balanced budget will be considered a structural deficit of no more than 0.5 per cent of GDP.
- Any country that runs a deficit larger than three per cent of its GDP will face sanctions.
- 17 eurozone countries and some EU nations to contribute €200 billion to IMF.
Germany and France had hoped to persuade all 27 EU countries to agree to change the treaty that governs their union. But Britain, which doesn't use the euro, firmly said no.
"What was on offer is not in Britain's interest so I didn't agree to it," said British Prime Minister David Cameron. "We're not in the euro and I'm glad we're not in the euro. We're never going to join the euro and we're never going to give up this kind of sovereignty that these countries are having to give up."
French President Nicolas Sarkozy blamed the British leader for scuppering an EU-wide treaty.
"David Cameron made a proposal that seemed to us unacceptable, a protocol to the treaty that would have exonerated the United Kingdom from a great number of financial service regulations," Sarkozy said shortly before dawn.
Hungary, the Czech Republic and Sweden said they would need to consult their parliaments, while the other six countries outside the eurozone — Denmark, Poland, Bulgaria, Romania, Latvia, Lithuania — agreed they wanted to join.
The EU leaders agreed that the eurozone, together with some other EU countries, would provide up to $268 billion in extra resources to the IMF, to be used to help European countries in dire straits.
'Too much delay': Flaherty
Speaking to reporters in Toronto on Friday, Federal Finance Minister Jim Flaherty said it has taken too long for European authorities and political leaders to deal with the crisis.
Flaherty said it's up to European leaders to commit their extensive resources to fix the eurozone's government debt crisis before they ask for help from countries outside the region.
Flaherty said there is "some effect, clearly" that the "European situation" is having a negative impact on Canada's economy.
A few weeks ago, private sector economists were anticipating Canada's gross domestic product would grow by 2.7 per cent to 2.8 per cent this year over 2010 but it appears now that the growth will be a more modest two to 2.1 per cent, Flaherty said.
"Some of that is because of the uncertainty, the lack of confidence arising out of the European situation and the failure of the European authorities, the eurozone leaders, to effectively deal with the issue. There's been too much delay."