23 Member States agree within the Council for an intergovernmental treaty to move forward for a new fiscal compact

At the end of the first working session of the European Council, European Heads of State or Government agreed on the necessity for urgent measures to be taken in the short term in order to overcome current economic difficulties. On the longer term and in the absence of unanimity, 23 Member states agreed on a new fiscal compact that would take the legal form of an intergovernmental treaty.

Although, according to the statement made by president Van Rompuy, there was a broad agreement on the substance of the new fiscal compact, it was not possible to reach an unanimous agreement within the Council and for the moment 23 Member states have greed to conclude an intergovernmental treaty to put it in place the new fiscal rule. The intergovernmental treaty should be signed in Mach 2012 in order to incorporate these measures at the earliest. At this stage, Hungary and the United Kingdom decided not to join the agreement, and Euro area Member States will be joined by Bulgaria, Denmark, Latvia, Lithuania, Poland and Romania. Czech Republic and Sweden will consult their Parliaments before taking a decision.

The new fiscal rule, which will have to be introduced in Member States' national legal systems, will imply that general government budgets will have to be balanced or in surplus. According to the new fiscal rule, Member States in excessive deficit procedure will have to submit to the Commission and the Council for endorsement, and will have to submit their draft budgets to the Commission.

A reinforced procedure was also agreed for Member States in excessive deficit procedure. Should a Member State be in breach of the 3% deficit ceiling, automatic consequences could be taken unless qualifies majority of Euro area members in opposed. Heads of Stated and Government also agreed to work on a deeper fiscal integration.

In the short term, the European Council agreed to take immediate action for the acceleration of the entry into force of the European Stability Mechanism (ESM), which will be in force in July 2012. Furthermore, Heads of State and Government agreed to change European official approach towards involvement of the private sector and strictly adhere to established International Monetary Fund (IMF) principles and practices. In this regard, the Council stresses that the decisions taken in July and October regarding Greek debt were unique and exceptional.