Day 2 of Tough Eurozone Talks Starts in Brussels

European Council President Herman Van Rompuy (R) and European Commission President Jose Manuel Barroso give a news conference at the end of the first day at the EU heads of states council meeting in Brussels. Photo by BGNES

The crucial negotiations of European leaders on the future of the EUR are entering their second day in Brussels.

Participants will attempt Friday to iron out differences regarding changes in the EU Treaty in order to establish a strict fiscal discipline.

On Thursday, EU leaders reached a principle agreement about stricter fiscal rules in the Eurozone and a commitment for balanced budgets and automatic sanctions for high deficits.

Unnamed diplomatic sources are quoted saying that there is also consensus on the essence of the measures but the legal form of the reforms is yet to be debated.

According to a declaration draft, the national budgets in the Eurozone will have to be balanced, meaning the yearly structural deficit should not surpass 0.5% from the nominal Gross Domestic Product, GDP. The draft further includes texts that this rule must be applied in national legislations on constitutional or equivalent level, something that will be monitored by the European Court.

There will be also automatic sanctions for countries, whose nominal deficit exceeds 3% from GDP.

The draft proposes to combine resources of the current and future EU bailout fund in order to stabilize the EUR, and to introduce the European Stability Mechanism of EUR 500 B one year ahead of the initial schedule – in July, 2012.

The last European Council summit for 2011, which started Thursday night, is viewed as crucial for the EU on a number of issues, but most importantly on the fate of the euro, the euro zone, and the debt crisis.

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