The EU president on Friday pledged to inject cash into an IMF war-chest and impose stricter rules on deficits as part of the latest measures announced to tackle the eurozone debt crisis.
After a crunch summit dubbed the last chance to save the embattled eurozone, European Union president Herman Van Rompuy said «euro area and other member states will aim to make available additional resources of up to 200 billion euro to the International Monetary Fund.”
“We are increasing our financial resources to address the crisis we face,» he said, stressing that the money would then be used to help debt-wracked eurozone nations.
Van Rompuy also announced that the eurozone’s future aid pot — the European Stability Mechanism (ESM) — would come into force earlier than first mooted, in July 2012.
He also acknowledged that the EU’s policy during the crisis in Greece of making private investors assume losses of their holdings of Greek debt was flawed and had been scrapped.
This policy, which he admitted had had «a very negative effect on the debt markets» was «officially over,» he declared.
Turning to more longer-term policies in an effort to avoid a repeat of the crisis in future, Van Rompuy said member states had agreed to submit to greater budgetary surveillance and commit to stricter discipline.
There would be «automatic» punishments for those countries that break the deficit limit of three percent of gross domestic product (GDP), Van Rompuy said.
As part of a new «fiscal rule», countries would promise to keep their so-called «structural deficit» — excluding one-off items and the effects of the economic cycle — to 0.5 percent of GDP annually.
They also committed to enshrining tighter rules in their constitutions, a major demand from Berlin.
However, no agreement was struck on the controversial topic of pooling euro area debt, seen by many analysts as the best way out of the crippling financial crisis the bloc finds itself in.
“We haven’t an agreement this night on this issue,» said Van Rompuy.
“We will discuss this issue again hopefully in calmer waters,» said Van Rompuy.
After reaching what he described as «broad agreement on the substance», Van Rompuy said that unity broke down when it came to drafting the legal texts that would put the principles into action right across the bloc.
“Of course, in the EU — built on treaties, protocols, laws — talking about the legal means is never easy,» he acknowledged.
“The conclusion is that the 17 eurozone members and six others will conclude an intergovernmental treaty.”
European sources later said that Hungary had opted out of the agreement, while Sweden and the Czech Republic needed to carry out further consultations at home.
The head of the European Central Bank, Mario Draghi, hailed the result as a «very good outcome» for the euro area, adding that the deal formed «the basis for a fiscal compact … for much more discipline in economic policy.”
Some took this as a hint that he could be open to more aggressive action in the bond markets, which investors believe would be one of the most effective ways of fighting the crisis.
“That was the signal we were waiting for. We hope now that it will act further, in all independence,» said one European source.
Another sign likely to be well received in the markets was French President Nicolas Sarkozy’s announcement that the bailout funds would in future be managed by the ECB.
“We came to another agreement, I can announce to you, that the central bank will manage the EFSF and the ESM,» Sarkozy said, referring to the eurozone’s current and future bailout mechanisms.
And the chancellor of Germany, Europe’s top economy, also signalled her satisfaction with the result.
“I have always said the 17 states of the eurozone needed to win back credibility. And I think that this can happen, will happen, with today’s decisions,» said Angela Merkel.
After marathon talks that wrapped up around 5:00 am (0400 GMT), leaders had achieved a «very, very important result … because we have learned from our mistakes and from the past», added the chancellor.