The European Council on Friday outlined plans to create a “new fiscal compact” and “strengthened economic policy coordination” in response to market pressures stemming from the region's debt crisis.
“This will require a new deal between euro area member states to be enshrined in common, ambitious rules that translate their strong political commitment into a new legal framework,” according to an EC statement.
The pact will require member states to balance their budgets, with deficits of no more than 0.5% of nominal GDP. States will be required to write “automatic correction mechanisms” into their national laws, according to the statement.
Also, member states will need to report their plans for issuing debt, according to the statement.
“We are committed to working toward a common economic policy. A procedure will be established to ensure that all major economic policy reforms planned by euro area member states will be discussed and coordinated at the level of the euro area, with a view to benchmarking best practices.”
“For the longer term, we will continue to work on how to further deepen fiscal integration so as to better reflect our degree of interdependence,” according to the statement.
European leaders broke out of an overnight summit session at approximately 5 a.m. CET in Brussels Friday, emerging as two groups: those signing on (or considering signing on) to the new compact, and the U.K., which flatly refused to do so.
Bloomberg contributed to this story.