EU, without Britain, moves towards fiscal deal

Tue Dec 13, 2011 1:10pm EST
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By Gilbert Reilhac

STRASBOURG, France (Reuters) - Up to 26 European Union countries will finalize a pact to enforce budget discipline more strictly in the euro zone by March, a top official said on Tuesday, as the bloc tries to move quickly to rebuild confidence but without Britain's backing.

European Council President Herman Van Rompuy expressed disappointment that Britain had shunned an agreement reached at an EU summit last week to pursue fiscal integration as part of efforts to tackle the debt crisis, but made clear the door would remain open for London.

"They recognize the euro is a common good," Van Rompuy said in a speech to the European Parliament in Strasbourg, commenting on those in the agreement. "Then, early March at the latest, this fiscal compact treaty will be signed."

The 'fiscal compact' is meant to allow closer scrutiny of countries' spending to stop a similar debt crisis recurring and potentially making it more palatable for the European Central Bank to step up its purchases of distressed euro zone debt to hold down borrowing costs.

The euro fell to an 11-month low around 1.3060 at 1600 GMT on Tuesday after German Chancellor Angela Merkel was quoted as telling a closed-door meeting of her conservative lawmakers she rejected any suggestion of raising the ceiling on Europe's future bailout fund, according to participants.

"Any hope of more money that is stifled triggers such a strong market reaction at the moment," a Frankfurt stock exchange trader said.

Merkel was responding to Van Rompuy's comment in parliament that a review of whether the 500 billion euro limit on the planned European Stability Mechanism was adequate would be completed in March.

Britain refused to agree to changes to the EU's fundamental law, the Lisbon treaty, to push tougher budget rules in the euro zone after it was unable to win a veto to protect its financial services industry against laws from Brussels.   Continued...