In the final European Council summit of the 2010 calendar year and the final under the current Belgian presidency
, the 27 leaders of the EU member states finally agreed on Thursday night to set up a permanent mechanism to ‘bail out’ any member state whose debt problems threaten the Eurozone.
The permanent mechanism will succeed the Eurozone's current €750bn temporary ‘bailout’ fund, the European Financial Stability Facility
(EFSF), in 2013 and to set up this facility, the European Union had to revise its governing treaty. The hope was this could be done in such as way as to avoiding referendums in each of the 27 member countries, all of which will have to ratify the revision, and so avoid many many months of further uncertainty and wrangling that recently plagued the EU until the Lisbon Treaty was finally adopted last year
The solution: two sentences that will be inserted into the Treaty. They read:
"The Member States whose currency is the Euro may establish a stability mechanism to be activated if indispensable to safeguard the stability of the Euro area as a whole. The granting of any required financial assistance under the mechanism will be made subject to strict conditionality."
In order to reach the agreement, it is clear that Germany had to compromise over its demand that the language spelt out the fund would be used only as a last resort, and David Cameron managed to seek assurances that Britain (which of course is outside of the Eurozone) would not be required to take part in any future Eurozone ‘bailout’ funds.
Following the meeting, the President of the European Council, Belgian Herman Van Rompuy
, said leaders were ready to do whatever was required to protect the currency: yet clearly not Mr Cameron (although to his credit he has allowed an agreement to be reached). While it still remains a mystery as to why such ‘bailout’ mechanisms were not in place from the start of the single currency, such a move should be welcomed by all – even the Eurosceptics who would just love to see the currency fail, plunging the whole continent into a huge economic depression, just so they can taunt “I told you so
The agreed revision will now be sent to the European Parliament, the European Commission and the European Central Bank, all of whom have to give their opinion on proposals to change the treaty even though their views do not bind the European Council. The treaty change will be approved at the European Council in March, if the three institutions have given their views by then. The text will then be sent to the 27 member states for ratification.