Exclusive: Van Rompuy urges fast-track euro zone moves
By Luke Baker
BRUSSELS (Reuters) - Tighter oversight of euro zone fiscal policy can be achieved through minor, rapid adjustments to the EU treaty, European Council President Herman Van Rompuy told EU leaders in an interim report to be discussed at a summit on December 8-9.
The aim would be to achieve a "new fiscal compact" that ties euro zone member states more strictly into budget deficit and debt rules, a step that may provide the European Central Bank with room to step up its purchasing of sovereign bonds.
ECB President Mario Draghi used the phrase "new fiscal compact" when he addressed the European Parliament last week, in a comment that suggested the bank would be ready to use more firepower to resolve the debt crisis if the euro zone moved decisively towards a more complete economic union.
"Moving the euro area towards a true economic union requires additional steps in terms of integration, towards a 'new fiscal compact'," says the interim report, dated December 6 and obtained by Reuters.
"To restore market confidence in the euro area, and to ensure the political sustainability of solidarity mechanisms, it is crucial to enhance the credibility of our budgetary rules (deficit and debt levels) and to ensure full compliance."
In the report, compiled after a week of intense consultation with all EU leaders, Van Rompuy also suggests that the euro zone's permanent bailout fund, the European Stability Mechanism, could be given a banking license, which would potentially allow it access to vast ECB liquidity.
"Introducing the possibility for the ESM to directly recapitalize banking institutions and to have itself the necessary features of a credit institution," the report lists as one of four proposed changes to the fund.
Other suggestions are that the ESM's decision-making procedures be brought more directly into line with IMF practices and that the current 500 billion euro ceiling of the ESM's capacity be reviewed. Continued...