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Most EU nations agree to new treaty to save euro

By Gabriele Steinhauser

Associated Press

Published: Friday, Dec. 9 2011 6:32 a.m. MST

BRUSSELS — The 17 countries that use the euro, plus nearly all of their European Union partners, agreed Friday to an ambitious treaty tying their finances together in the hopes of solving Europe's debt crisis. Yet opposition led by Britain created a deep rift in the union.

In drafting a new treaty, the countries hope to help European nations struggling with giant debts over the long term, and in that sense there were early indications of success. Such an agreement is considered necessary before the European Central Bank and other institutions commit more money to lowering the borrowing costs of heavily indebted countries like Italy and Spain.

"It's a very good outcome for the euro area, very good," ECB President Mario Draghi said in Brussels. "It is going to be the basis for much more disciplined economic policy for euro-area members. And certainly it is going to be helpful in the present situation."

Stocks and the euro climbed. The Stoxx 50 of leading European shares and Dow futures both rose 0.7 percent, and the euro was trading 0.5 percent higher at $1.3413.

But Draghi has yet to say whether the European Central Bank will take more aggressive action to buy the bonds of heavily indebted countries, and borrowing costs for European governments were slightly higher Friday.

While the deal could help save the euro, the political implications of the rift are enormous. Germany and France had hoped to persuade all 27 EU countries to agree to change the treaty that governs their union. But Britain, which doesn't use the euro, firmly said no.

Britain's leaders argued that the revised treaty would threaten their national sovereignty and damage London's esteemed financial services industry. Germany and France, the eurozone's biggest economies, made clear that a deal among the 17 euro countries and whoever else wanted to join was better than nothing.

Hungary, the Czech Republic and Sweden said they were undecided and would need to consult their parliaments, while the other six countries outside the eurozone — Denmark, Poland, Bulgaria, Romania, Latvia, Lithuania — agreed they wanted to join.

Swedish Prime Minister Fredrik Reinfeldt, a non-euro country, suggested to The Associated Press that Swedish participation was unlikely.

"It would be very odd signing up to a treaty ... as if we were a eurozone country. And that was never the aim," he said. "If the eurozone has problems these become also Swedish problems."

European Parliament speaker Jerzy Buzek, however, painted the agreement as pitting Britain against the rest of the EU. "We have a result: very good, 26 versus one. So we are united European Union. And we are much stronger," he said Friday.

French President Nicolas Sarkozy laid the blame for the split at the feet of British Prime Minister David Cameron.

"David Cameron made a proposal that seemed to us unacceptable, a protocol to the treaty that would have exonerated the United Kingdom from a great number of financial service regulations," Sarkozy said shortly before dawn, after what he called a "difficult" dinner meeting had dragged through the night.

Cameron defended his stance.

"What was on offer is not in Britain's interest so I didn't agree to it," he said. "We're not in the euro and I'm glad we're not in the euro. We're never going to join the euro and we're never going to give up this kind of sovereignty that these countries are having to give up."

The new agreement — and the new rift — came on a now-clouded anniversary, 20 years to the day after the treaty that led to the creation of the euro was drafted. That agreement, in turn, grew out of ambitous post-World War II efforts to unite a bloodied continent.

The treaty will constitute unprecedented intervention in national budgets by a central European body.

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