BRUSSELS: Leaders granted struggling euro nations a lasting financial lifeline Thursday, ring-fencing their shared currency with an agreement to rewrite the European Union rule-book. Changes to the Lisbon Treaty were demanded by Germany to enable a temporary, $1 trillion rescue fund to be turned into a permanent umbrella that will allow governments who fall on hard times to seek and obtain help from currency partners. From mid-2013 then, international loans and guarantees of the sort offered to Greece and Ireland already this year, the latter drawn from a 440-billion-euro reserve set up by eurozone states in May, will only be made available if judged “indispensable.” That tweak came at Germany's insistence, although there was no sign of Europe's paymaster succeeding in a similar push for future bailouts to require unanimous backing - which many oppose as it would grant Berlin an absolute veto. The agreement reached at the EU's seventh and last summit of a rollercoaster year will be activated “by mutual agreement” among euro partners, after choreographed legal maneuvers by the bloc's 27 states to meet a Dec. 31, 2012 deadline.The milestone moment represents the birth pangs of shared cross-border governance 12 years after experts said the creation of the euro was flawed due to the absence of a central government to control economic policy. It became necessary because money markets gnawed away relentlessly at weak links in the euro chain after the world's deepest recession exposed huge debts run up by eurozone governments during boom years. As with Greece or Ireland, help will only be forthcoming if painful cuts and other changes are enacted. Greek Prime Minister George Papandreou best captured the spirit of the evening. “The challenge is a collective one now,” he said. “We all share the same objective: to ensure a stable Europe and currency,” added German Chancellor Angela Merkel. Europe was shocked by criticism levelled at it during indecision over Greece, and EU leaders have been desperate to try and show they are not slaves to international markets who forced rapid action over Ireland. However, they remain divided on how big to make the future fund, likewise on whether to create joint eurozone bonds to help governments of weaker economies borrow at lower interest rates. “We need to prove that we have deep pockets,” said Belgium's Finance Minister Didier Reynders, who has chaired a relentless series of crisis meetings since July but whose own country is also in the firing line for markets concerned at the absence of a stable government. Yet a rump of hardline countries led by Germany say there is no urgency to boost the existing reserve as it has barely been touched so far. Controversy over Luxembourg Prime Minister Jean-Claude Juncker's eurobonds proposal for eurozone governments to pool financial guarantees - allowing each to borrow at common rates through joint bonds - also underlined how distant shared economic governance remains. Merkel insists the plan “would not rid Europe of its weaknesses, it would simply transmit them across the board,” but Portuguese Prime Minister Jose Socrates firmly backed the idea. Reynders meanwhile pointed out that the eurozone was already de facto in E-bond territory, “because we are organizing a guarantee coming from different member states and we have an average of interest rates.” In a clear warning that political solidarity needs to be anchored in hard cash, the European Central Bank said shortly before the summit opened that it will almost double its capital reserves over the next two years. The ECB has bought 72 billion euros of government bonds to contain gaps in yields between Germany and financially struggling eurozone states since May. – Agence France
