Twenty-three European Union states agreed on Friday to set up a new treaty, giving up crucial powers over their own budgets in an attempt to overcome a crippling debt crisis.
WHICH ARE THE COUNTRIES THAT SUPPORT THE TREATY?
All 17 countries that use the euro, plus Denmark,Latvia, Lithuania, Poland, Romania and Bulgaria. Those six states are likely to eventually adopt the common currency, so it makes sense for them to subscribe to the rules now.
WHO ALL ARE OPPOSING IT?
The UK and Hungary gave a clear "no," while Sweden and the Czech Republic left the door open to sign up at some point.
UNRESOLVED ISSUES
Euro zone leaders did not decide to boost the overall firepower of their own bailout funds, which is currently limited to 500 billion. They promised to reconsider that cap in March They did not give a clear signal that theEuropean Central Bank will buy bonds from struggling countries on a massive scale to keep their funding costs in check.
They did not agree to more intrusive powers for the European Commission over the fiscal policies of wayward states, as had been demanded by European Council President Herman Van Rompuy.
Instead, they promised to "examine swiftly" much more lenient proposals from the Commission. They did not allow the bailout funds to directly recapitalise failing banks. That could have prevented countries from taking on more debt when they have to bail out lenders.
STRATEGIES TO ESCAPE DEBT TRAP Debt brakes: All 23 countries commit to keep their deficits below 0.5% of economic output. That cap can only be broken in exceptional circumstances. The European Court of Justice will make sure all states' debt brakes are effective.
Automatic penalties : It will be more difficult for countries to stop one of their partners from being punished for breaking the EU's debt and deficit rules. All states have to tell their partners in advance how much debt they plan to take on through bond sales.
IMF aid: The euro zone, together with other willing EU states, will give as much as 200 billion to the IMF, so that it can help beef up the euro zone's firewalls.
European Stability Mechanism: The euro zone's new, permanent bailout fund, the European Stability Mechanism, will take over from the current rescue fund, the European Financial Stability Facility, one year ahead of schedule, in July 2012. Unlike the EFSF, a hastily set up private company owned by all euro zone states, the ESM is a permanent organization run by governments. It also has paid-in capital, similar to a bank, and is therefore more credible on financial markets.
WHICH ARE THE COUNTRIES THAT SUPPORT THE TREATY?
All 17 countries that use the euro, plus Denmark,Latvia, Lithuania, Poland, Romania and Bulgaria. Those six states are likely to eventually adopt the common currency, so it makes sense for them to subscribe to the rules now.
WHO ALL ARE OPPOSING IT?
The UK and Hungary gave a clear "no," while Sweden and the Czech Republic left the door open to sign up at some point.
UNRESOLVED ISSUES
Euro zone leaders did not decide to boost the overall firepower of their own bailout funds, which is currently limited to 500 billion. They promised to reconsider that cap in March They did not give a clear signal that theEuropean Central Bank will buy bonds from struggling countries on a massive scale to keep their funding costs in check.
They did not agree to more intrusive powers for the European Commission over the fiscal policies of wayward states, as had been demanded by European Council President Herman Van Rompuy.
Instead, they promised to "examine swiftly" much more lenient proposals from the Commission. They did not allow the bailout funds to directly recapitalise failing banks. That could have prevented countries from taking on more debt when they have to bail out lenders.
STRATEGIES TO ESCAPE DEBT TRAP Debt brakes: All 23 countries commit to keep their deficits below 0.5% of economic output. That cap can only be broken in exceptional circumstances. The European Court of Justice will make sure all states' debt brakes are effective.
Automatic penalties : It will be more difficult for countries to stop one of their partners from being punished for breaking the EU's debt and deficit rules. All states have to tell their partners in advance how much debt they plan to take on through bond sales.
IMF aid: The euro zone, together with other willing EU states, will give as much as 200 billion to the IMF, so that it can help beef up the euro zone's firewalls.
European Stability Mechanism: The euro zone's new, permanent bailout fund, the European Stability Mechanism, will take over from the current rescue fund, the European Financial Stability Facility, one year ahead of schedule, in July 2012. Unlike the EFSF, a hastily set up private company owned by all euro zone states, the ESM is a permanent organization run by governments. It also has paid-in capital, similar to a bank, and is therefore more credible on financial markets.
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