European finance ministers will today discuss the mechanics of a so-called “fiscal compact” for tighter budget rules while seeking to meet a self-imposed deadline for the drawing of additional aid to the debt crisis.
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Euro-zone finance ministers will hold a teleconference today at 3:30 p.m. Brussels time the fiscal compact that was negotiated at a December 9 European Union summit, as well as 200 billion euros in additional funding through the international Monetary Fund. European Central Bank President Mario Draghi told the Financial Times that the bank will not step up bond purchases, saying that to do so would be overstepping its mandate.
“People have to accept that we have to, and always will, act in accordance with our mandate and within our legal foundations,” Draghi said in the interview. “The important thing is to restore the trust of the people — citizens as well as investors — in our continent. We won’t achieve that by destroying the credibility of the ECB.”
Euro-zone officials will aim to meet their deadline today to arrange the IMF loans, with about 150 billion euros having been pledged by euro-area central banks and another 50 billion euros to be contributed by non-euro EU states. The finance ministers will also discuss the decision-making process of the bloc’s permanent bailout fund, the European Stability Mechanism.
Luxembourg’s Jean-Claude Juncker has expressed confidence that today’s deadline will be met, but Germany’s Bundesbank said last week it saw no “urgent need” to reach a decision, suggesting it could be delayed. The U.K. is still weighing whether to contribute more funds to the IMF.
Today’s conference call may focus on setting a course for more detailed debate on the fiscal compact next month. The tighter fiscal rules were proposed by German Chancellor Angela Merkel, who demanded treaty-level barriers against runaway debt and deficits to offer the prospect of a future “fiscal stability union.”
The European Commission’s ability to enforce deficit limits will be strengthened, requiring a high-deficit state to amass a super majority within the euro zone to head off disciplinary procedures. Governments will also be required to adopt balanced-budget amendments with an “automatic correction mechanism” to be enforced by the European Court of Justice and national courts.
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Euro leaders hope to have a treaty prepared by late January, and signed by early March. The treaty will take effect once ratified by nine of the 17 euro-zone countries. EU states outside the euro will join as they ratify. So far, only the U.K. has refused to sign up.