25 EU member states sign fiscal compact

Heads of state and government of 25 EU countries, minus Britain and the Czech Republic, on early Friday officially signed an intergovernmental treaty on fiscal stability. Signing of the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union took place on the second day of a two-day annual spring summit here in Brussels. The leaders finished the process quickly, many of them smiling and talking to each other in relaxed way afterwards. On Thursday, they had managed, for the first time in two year as many of them boasted, to focus on growth and jobs instead of an escalating debt crisis. According to European Council President Herman Van Rompuy, signing of the fiscal treaty on Friday was an important step in reestablishing confidence in the economic and monetary union. "Once this Treaty enters into force, its effects will be deep and long-lasting," he said, "It helps prevent a repetition of the sovereign debt crisis," said Van Rompuy. Under the inter-governmental treaty, each signatory must adopt balanced-budget rules by introducing a "debt brake" on budget deficits. If member states exceed the structural debt limit of 0.5 percent of their GDP, they would be subjected to penalties of up to 0.1 percent of their GDP. The compact is expected to enter into force on Jan. 1, 2013. German Chancellor Angela Merkel also said on Friday that the signing of fiscal compact is a milestone in the history of the EU. "It is a strong signal that we are learning the lesson of the crisis and we understood the signals," said Merkel. Among many others, the European Central Bank has been an ardent supporter for stricter fiscal rules, which have been deemed as an effective measure to plug the loophole. Britain and the Czech Republic were the only two EU countries that did not sign up to the fiscal compact. "We are disappointed that the fundamental issue is the deficit criterion and not the debt criterion and we don't see it as a good idea to have a special euro zone summit without all contracting parties," Czech Prime Minister Petr Necas said on Thursday. Leaders were originally expected to decide also on Friday on whether to give Europe's bailout funds more firepower amid concerns that the current safety nets are too weak to support big struggling countries like Italy or Spain.