Greek Prime Minister Lucas Papademos welcomed the decisions taken in Brussels, noting that they amounted to a ?fiscal contract? foreseeing automatic penalties for those who violate the rules.
?This regulation will have to be enshrined in the Constitution,? Papademos told a press conference.
He added that although the summit decisions did not explicitly refer to the issue of Eurobonds, the scenario had not been ruled out.
Asked whether Greece would need to take any new austerity measures for 2013 and 2014, Papademos said that it was not a foregone conclusion but might be inevitable.
?If the measures for 2012 are implemented properly, there will be no need for new ones but if it is deemed necessary new measures will be taken.?
Papademos described the Greek government’s efforts so far as «effective,» adding however that his administration would need to «successfully implement the economic program» agreed with the country’s foreign creditors if it is to comply with the new fiscal rules.
Twenty-six of the 27 EU leaders agreed to pursue a tougher budget discipline regime with automatic sanctions for deficit sinners in the single currency area. All 23 countries are committing to keep their deficits below 0.5 percent of GDP.
That cap can be broken to counteract a recession or in other exceptional circumstances. The European Court of Justice will make sure all states’ debt brakes are effective.
The eurozone, together with other willing EU states, will give as much as ?200 billion to the International Monetary Fund to help it rescue troubled nations.
The eurozone?s permanent bailout fund, the European Stability Mechanism, will take over from the current rescue fund, the European Financial Stability Facility, one year ahead of schedule, in July 2012. Unlike the EFSF, the ESM has paid-in capital, similar to a bank, and is therefore more credible on financial markets.
The ESM’s decision-making process was simplified in emergency situations, allowing struggling countries to get financial help if an 85 percent majority of capital holders agree. That is meant to stop small countries from blocking or slowing down urgent rescues, as has happened in the past.
The eurozone eased rules that have forced banks and other private investors to take losses when a country gets a bailout from the ESM. The previous push to inflict losses on bondholders has been blamed for exacerbating the crisis.
Eurozone leaders did not decide to boost the overall firepower of their own bailout funds, which is currently limited to ?500 billion. They promised to reconsider that cap in March, shortly before the ESM comes into force.
They did not agree to more intrusive powers for the European Commission over the fiscal policies of wayward states, as had been demanded by European Council President Herman Van Rompuy and some nations. Instead, they promised to «examine swiftly» much more lenient proposals from the Commission.
[Kathimerini English Edition