31.01.2012
By Simon Miller
The UK’s Prime Minister David Cameron will go to Parliament this afternoon to answer criticism that he has backed down from vetoing the use of European Union institutions by the 26 countries that signed a fiscal pact last night.
Cameron was hailed by his backbenchers in December for walking away from talks and warned that he would refuse to allow EU institutions such as the European Court of Justice by the fiscal pact countries.
However, the agreement signed last night will allow sanctions on countries that breach European Union budget deficit limits and for balanced budget rules to go into national law.
To enforce this, the ECJ would be used if “claimants” objected that another signatory country had failed to meet fiscal disciplinary rules and could impose a 0.1% of GDP penalty.
Out of the 27 EU-member countries, only the UK and the Czech Republic refused to agree to the fiscal pact.
Speaking to reporters after the meeting, Cameron said that the treaty in itself would not solve the financial crisis dominating the eurozone.
"I don't think this treaty on its own will sort the eurozone's problems. There is a fiscal problem but there is also a competitiveness issue," he said.
However, Conservative MPs will be concerned that despite the UK’s objections, the treaty allows for the adoption of the fiscal pact into European Union treaties within five years.
Cameron commented: "We are not signing this treaty. We are not ratifying it. And it places no obligations on the UK. Our national interest is that these countries get on and sort out the mess that is the euro."
Eurozone leaders also agreed that the €500bn (£418bn) European Stability Mechanism (ESM) will come into force in July - a year earlier than planned and as a result of the crisis in indebted countries such as Greece.
Other stories you may find of interest:
A very British Complex
Greater complexity leads to greater risks for banks according to Professor Simon Collinson, Warwick Business School and the Simplicity Partnership
Journey’s end for Solvency II?
Solvency II, the long-mooted new capital adequacy regime for Europe’s insurers, is nearing implementation. Graham Buck reviews its progress
Impacting on investment
With emerging markets looking for investment, Simon Miller looks at the rise of impact investment and what risks entails in this socially aware vehicle
