European Union leaders to agree on law change for euro stability
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