By Peter Spiegel in Copenhagen, George Parker in London and Quentin Peel in Berlin
A new treaty to impose fiscal discipline on eurozone countries would allow governments to ignore tough budget deficit limits in the case of an ?unusual event? or during a ?severe economic downturn?, according to a draft of the pact obtained by the Financial Times.
The draft, the third since the negotiations began last month, allows the breach of the medium-term deficit
cap – defined in the text as 0.5 per cent of national economic output – temporarily and only if it does not put the government?s debt levels on an unsustainable level.
The latest formulation appears to give eurozone countries significant leeway to escape the pact?s most onerous requirement, watering down the hard limits in earlier drafts.
This draft, which will be discussed by European negotiators on Thursday, contains other significant revisions. Language that would have allowed the pact?s signatories to forge closer co-operation towards a single market – something that is normally the province of existing European Union treaties covering all 27 member states – has been excised.
The German government is confident that there are no ?major political controversies? standing in the way of agreement on the eurozone treaty, according to officials in Berlin. Angela Merkel, the German chancellor, said yesterday there was ?a good chance we can expect significant progress or a political conclusion? by the next European summit on January 30.
The new treaty is being negotiated outside of the normal EU processes because of a UK veto, and inclusion of such language would, in effect, create a parallel track on single market integration that would have excluded Britain. London views the creation of a Europe-wide trade zone as one of its primary benefits of EU membership and any inclusion of such language in the new treaty as anathema.
UK officials said Britain has allies – including Germany, the Netherlands and the European Commission – who have insisted that single market matters should be discussed only among all 27 EU member states.
?It is good that the architects of this pact have put aside their objectionable and unlawful scheme to debase the proper running of the single market,? said Martin Callanan, leader of British Conservatives in the European Parliament.
The draft also excises the requirement that signatories attempt to reintegrate this treaty into EU laws within the next five years. The measure had been inserted into earlier drafts at the behest of EU institutions. Berlin hopes that the new treaty will be signed by March 1 by most if not all 26 EU countries involved in the negotiations.
? The Financial Times Limited 2012