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People's Daily Online>>Opinion

Euro zone makes progress in systemic reforms

By Zhang Zhixiang, Zhang Chao (People's Daily Overseas Edition)

16:53, December 19, 2011

Edited and translated by People's Daily Online

At the European Union Summit last weekend, 26 out of the union’s 27 member states agreed to a new fiscal treaty, in order to resolve the ongoing debt crisis through system reforms and to achieve greater integration.

A breakthrough was made at the summit as all 17 Euro zone countries and all non-euro countries except Britain agreed to a German-French proposal for an intergovernmental treaty that would require them to enforce stricter fiscal and financial discipline in their future budgets. Although the bid to change the European Union treaty failed due to Britain’s objections, the significance of the summit lies in the fact that it involved systemic reforms for the first time, setting a precedent for future reforms.

The final communiqué of the European Union Summit last week consists of 16 sections, involving strengthening the European economic and monetary union, making a new fiscal treaty, strengthening policy coordination, as well as managing and strengthening stability mechanisms. Among them, the new fiscal treaty has attracted the most attention.

According to the new fiscal pact, euro zone member countries shall introduce the pact in their national constitutions or equivalent legislative acts; annual structural deficit shall not exceed 0.5% of nominal GDP; general government budgets shall be balanced or in surplus; member countries entering the “excessive deficit procedures” must voluntarily accept penalties and other specific measures taken by the European Commission and the EU Council. If fully implemented, the new pact will have a positive significance to restoring market confidence and building an EU fiscal alliance.

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