Papademos says EU fiscal deal is ‘substantive’

Prime Minister Lucas Papademos hailed as ?substantive? an agreement between 26 of the 27 European Union countries in Brussels on Friday to introduce tougher fiscal discipline and closer economic governance.

Speaking to journalists after marathon talks that began on Thursday night and continued on Friday, Papademos described the regulations agreed upon, which foresee automatic penalties for countries that breach debt and deficit limits, as ?balanced.?

?This regulation will have to be enshrined in the Constitution,? Papademos said. Finance Minister Evangelos Venizelos explained that Greece would not be able to change the Constitution until 2013 to include the so-called ?debt brake.? However, he added that Article 28 of the Constitution would allow the terms of the Brussels agreement to be adopted by Parliament as an international treaty.

In terms of some of the measures agreed upon – such as a need for balanced budgets, or ones that produce a primary surplus – Greece is already bound by its loan agreement with the EU and the International Monetary Fund to achieve just that by next year. The bloc leaders, with the exception of the UK?s David Cameron, committed to the principle of their countries listing each year all their public borrowing requirements for the following year.

The Brussels deal also calls for debt to be limited below 60 percent of gross domestic product and deficits to remain under 3 percent of GDP. The European Court of Justice will be given the power to ensure that all countries are applying the debt brake.

Leaders agreed that the eurozone?s permanent bailout fund, the European Stability Mechanism, would take over from the current rescue fund, the European Financial Stability Facility, one year ahead of schedule, in July 2012. The eurozone, together with other willing EU states, will give as much as 200 billion euros to the IMF to help it rescue troubled nations.

Papademos revealed that the idea of eurozone countries issuing common bonds was also discussed. ?This proposal was not rejected,? said the prime minister. ?We will examine it in more detail in March.?

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.?

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