EU leaders have paved the way for a new emergency fund to bail out vulnerable euro countries through a treaty amendment. According to the draft agreement, the permanent crisis mechanism will be activated according to the draft “if the entirely euro area’s stability is threatened.”
EU countries who continue to use their own currencies, namely Sweden, Denmark, the UK, Poland, Estonia, which joins the eurozone on January 1st, 2011, Latvia, Lithuania, the Czech Republic, Hungary, Bulgaria and Romania, are governed by one particular point in the conclusions.
“The member states that do not have the euro as a currency may, if they wish, participate in this work. They may decide to contribute to activities within the framework for the mechanism on a case by case basis,” the draft states.
A two-sentence amendment to the EU treaty paves the way for the creation of a permanent emergency fund. After just one and a half hours of discussion, European leaders agreed on a treaty amendment, which states that the fund should only be used when no other means exist.
“We are ready to do everything necessary to secure financial stability in the euro area,” EU Commission President Jose Manuel Barroso said when the meeting ended late on Thursday night.
Although the permanent emergency fund was created for the euro zone, Sweden and the other countries outside the eurozone were present when EU finance ministers began discussing details.
Sweden currently supports Iceland, Latvia and Ireland. Reinfeldt has not excluded the possibility of Sweden once again intervening to support crisis-hit countries both in and outside the eurozone.
However, he emphasised that for Swedish support to happen now would involve geographical proximity or financial ties, as well as a clear and reliable restructuring plan and IMF assistance.
“Our starting point is that we make a decision ourselves from case to case. This is about loans and not support – adjusted to conditions on the market,” said Reinfeldt.
“We will look at how the country in question deals with reform so that we feel that we are heading in a direction that will generate growth and improve public finances. A stable euro and a well functioning eurozone is good for Sweden,” he added.
The temporary fund of €440 billion (3.97 trillion kronor, $583.4 billion), which was established in the spring spring and runs until mid-2013 when the permanent fund takes over, has been used to help Ireland.
However, many doubt that there will be enough money to help Portugal, Spain or other strained euro countries that may need support. As such, the current needs require replenishing the fund.
“Very little of the fund’s resources have been used, only 4 percent,” said President of the European Council Herman Van Rompuy.
“The EU and the euro area will be stronger from the crisis,” the European Council wrote in its conclusions from the top-level meeting, according to a draft obtained by news agency TT.
“The growth prospects are strengthening and the fundamentals of the European economy are sound,” EU leaders told the council.
However, according to the conclusions, the crisis “demonstrated that there is no room for complacency.”
In their conclusions, EU leaders gave a nod to Greece and Ireland in recognition of what they described as “impressive progress” in terms of their restructuring programmes and budget decisions. At the same time, they stressed the importance of implementing existing programmes fully.
The EU leaders also agreed to give Montenegro candidate status, the first step towards negotiations on future EU membership.