Czechs join UK in rejecting EU fiscal pact

Czech PM Petr Nečas says country may opt in later, remains critical of provisions on debt, lack of equal say in talks by non-euro states

Economy|Foreign Affairs
Brian Kenety | 31.01.2012
UK prime minister David Cameron (left) and his Czech counterpart Petr Nečas talk shop at a December meeting of the European Council; while Britain will stay out of the new EU treaty (and earlier vetoed it), the Czech Republic may later opt in

The new EU treaty on fiscal discipline will be signed off on in early March by only 25 of the 27 member states, after the Czech Republic – citing “constitutional reasons” — announced late Monday its decision to stay out of the pact, along with the United Kingdom, although the Czech prime minister left the door open to joining later if certain issues are addressed.

“I could not express my approval of this treaty, but I consider it was extremely important that a consensus was reached on article 15 that it will be possible to opt in and to accede to this treaty without any requirement for negotiations. So this treaty remains open for future accession," Prime Minister Petr Nečas (Civic Democrats, ODS) said, adding that the Czech Republic would implement many aspects from the pact of its own accord.

The treaty, which aims to achieve stability and convergence in the Economic and Monetary Union, obliges signatories to enshrine a balanced budget rule in their binding legislation — “preferably constitutional” — and to create “automatic correction mechanisms” at the national level should they overstep the budget deficit ceiling.

By imposing caps on deficits and government debts, European leaders hope to combat the financial crisis that has much of the continent slipping towards recession, and reassure skeptical financial markets that EU governments are committed to impose control over lax borrowing and combat growing debt. ‘We recognize that financial stability is not enough in itself to get out of the crisis. We must do more, particularly in the areas of growth and employment.’

While stressing that the new pact is “all about more responsibility and more surveillance,” EU president Herman van Rompuy told a news conference in Brussels that member states must “recognize that financial stability is not enough in itself to get out of the crisis,” adding, “We must do more, particularly in the areas of growth and employment.”

Under the treaty, an errant country could face a fined imposed by the European Court of Justice of up to 0.1 percent of GDP if the budget rule is not transposed correctly; the penalty money would then go either to the European Stability Mechanism (which begins operating in July) or to the general EU budget (in the case of fines imposed on non-eurozone signatories).

Although the Czech Republic did back the €500 billion European Stability Mechanism, designed to both rescue and act as a firewall against heavily indebted states, Nečas said that the Czech Republic would not sign up to the EU treaty because non-euro countries would not be able to participate in all eurozone summits and it did not sufficiently address the issue of debt among member states.

Nečas also noted that it would face a tough ratification process at home: Czech President Václav Klaus has said he would refuse to sign it. “There is the insurmountable reason that if we do not find a broad consensus over the way of ratification, the treaty will be hardly acceptable,” the prime minister said.

For its part, UK prime minister David Cameron has said Britain is determined not to relinquish national sovereignty to the treaty’s provisions for automatic sanctions against governments that exceed the new debt limits.

The Treaty on Stability, Coordination and Governance in the Economic and Monetary Union will be signed in March and enter into force once it has been ratified by at least 12 euro area member states. It will be legally binding as an international agreement and will be open to the EU countries which do not sign it at the outset. The aim is to incorporate it into EU law within five years of its entry into force. 

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