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New EU deal mired in legal, political minefield

12 December 2011, 22:40 CET
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(BRUSSELS) - The EU's latest deal to fix the debt crisis, though barely three days old, faces a legal and political minefield as Britain mulls court action and France's Socialists vow to junk it in case of election.

Already described as a "European Union 2", the pact is designed to tighten fiscal discipline and economic union within the bloc.

It was agreed on Friday by 26 of the 27 "EU 1" when Britain remained odd man out and remains a work-in-progress deadlined for March.

"There are still a lot of grey areas," an EU diplomat admitted. "But the EU has plenty of very intelligent lawyers and I'm sure they're busy working this out," he told AFP.

Struck at what was supposed to be a watershed summit for the euro, the pact-to-be left markets underwhelmed while throwing up a swarm of new challenges in difficult times for the EU as it faces slumping support from Europe's half a billion people.

Prime Minister David Cameron told the British parliament Monday that London for one would be looking closely at whether the signatories of the new pact were authorised to use EU institutions -- such as the European Commission or European Court of Justice -- to deal with eurozone problems.

"This is new territory and it does raise important issues," Cameron said.

A ranking EU official who asked not to be identified said the bloc's legal services remained divided on that question "with some afraid of a complaint being lodged by Britain."

Cameron, the official said, did not explicity brandish the threat of judicial attack during the summit "but he clearly underlined there was a problem from the British point of view."

In a lengthy analysis, the Brussels-based European Policy Centre said "a key set of questions need to be answered about the content, legal nature, and ratification/entry," of the new pact, which would be an inter-governmental accord signed in the first instance outside the EU rulebook, the Lisbon Treaty.

Still to be worked out would be the role of the up to nine non-euro countries in a eurozone pact as observers or actors; whether the existing EU institutions, including the European Parliament, could play a role: how to incorporate the deal into a treaty.

As Moody's on Monday decried the summit's failure to produce new "decisive policy measures", in Brussels the European Commission announced a package of new legislation to tighten budgetary discipline -- much of it going over the same ground as the Friday deal.

The package includes new financial sanctions for budget deficit offenders in the euro area states.

EU Economics Commisioner Olli Rehn said that the new rules, to be enforced from Tuesday, were not "fully equivalent" to the fiscal compact which is to be drawn up in the coming months.

He added that the new deal woul provide additional budgetary discipline, including a "golden rule" requiring balanced budgets.

But the new fiscal compact may first have to be ratified, either by parliaments or via national referendums.

With the euro crisis feeding euro-scepticism, this could prove difficult in Sweden, Denmark or Ireland.

Meanwhile in France, President Nicolas Sarkozy's leading rival at elections in May, Socialist Francois Hollande, said he would renegotiate last week's EU fiscal pact .

Hollande said if elected he would seek to persuade his European partners to issue joint eurobonds to pool their sovereign debt, to allow greater European Central Bank intervention on bond markets and to agree stimulus measures.

Asked whether he felt bound by the deal Sarkozy signed last week, Hollande said: "If I'm elected president I'll renegotiate this deal to include what is missing today."


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