Euro­pean Union lead­ers to agree on law change for euro sta­bil­ity

The Pak Banker - - International3 -

BRUS­SELS: Euro­pean Union lead­ers will agree next week to in­sert two sen­tences into the EU treaty to pave the way for the cre­ation of the Euro­pean Sta­bil­ity Mech­a­nism from 2013, draft con­clu­sions of the sum­mit showed.

The ESM is to open the way for pri­vate sec­tor in­vestors to take a loss in case of a sov­er­eign debt re­struc­tur­ing, which will put mar­ket pres­sure on gov­ern­ments to con­duct sound fis­cal poli­cies and pre­vent an­other sov­er­eign debt cri­sis.

The ESM would also pro­vide fi­nan­cial sup­port to euro zone coun­tries which suf­fer liq­uid­ity, but not sol­vency prob­lems, through a fund that is likely to be big­ger than the cur­rent 750 bil­lion eu­ros bailout fund the euro zone has at its dis­posal.

But to cre­ate the Euro­pean Sta­bil­ity Mech­a­nism, Ger­many and France in­sisted that the EU's high­est law, the EU treaty, has to be amended so that its op­er­a­tions are not deemed un­con­sti­tu­tional by Ger­man courts.

The con­clu­sions, ob­tained by Reuters, said lead­ers of the 27-nation bloc would agree to amend the treaty by adding the fol­low­ing sen­tences to the ex­ist­ing ar­ti­cle 136:

"The Mem­ber States whose cur­rency is the euro may es­tab­lish a sta­bil­ity mech­a­nism to safe­guard the sta­bil­ity of the euro area as a whole. The grant­ing of fi­nan­cial as­sis­tance un­der the mech­a­nism will be made sub­ject to strict con­di­tion­al­ity."

The ESM will be based on the agree­ment reached by euro zone fi­nance min­is­ters on Novem­ber 28. For a full text of the agree­ment see:

The lead­ers' con­clu­sions, which are al­ways pre­pared in ad­vance of a sum­mit and al­most never changed, said the amend­ment did not in­crease the pow­ers con­ferred on the Euro­pean Union by mem­ber states.

This means that the change would not have to be sub­ject to a ref­er­en­dum in Ire­land and also sat­is­fies Bri­tain which in­sisted the change should not en­tail any trans­fer of power to Brus­sels. -Reuters

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