EU bows to Merkel over euro crisis rules

BRUSSELS, Oct. 29 (UPI) -- EU leaders meeting in Brussels agreed to tough spending rules for the eurozone in a bid to avert another financial crisis.

Bowing to most of the demands tabled by German Chancellor Angela Merkel, EU leaders green-lighted quicker and harsher fines for repeat budget overspenders, as well as a permanent emergency fund to safeguard the euro. EU officials also agreed to hold the private sector more accountable in case of state defaults.

"Today we took important decisions to strengthen the eurozone," EU Council President Herman Van Rompuy said after eight hours of tedious negotiations culminated in the agreement. "We recommend a robust and credible permanent crisis-resolution mechanism to safeguard the financial stability of the eurozone as a whole."

Under the new deal, Brussels will be able to warn member states of speculative bubbles and fine them earlier and harsher if they go beyond the European Union's deficit limit of 3 percent of gross domestic product. The sanctions scheme applies to 25 EU members. Only Britain and Denmark, who aren't members of the eurozone and have no plans to join, are exempt.

Leaders agreed to a permanent mechanism that would replace a $600 billion emergency safety net when it expires in 2013. Private investors as well as the International Monetary Fund will have to contribute to it, leaders said.

The short-term mechanism was created to bail out indebted eurozone countries and stabilize the euro. The common currency's crisis almost brought the bloc to its knees, leaders said in Brussels.

While Berlin didn't succeed in pushing through suspending voting rights for repeated budget offenders, EU leaders agreed to consider slight changes to the Lisbon Treaty, the body's constitutional framework, to make the new measures legally watertight.

"Everybody agreed that there must be a permanent crisis mechanism, and everybody agreed that this must be formed by the member states," German Chancellor Angela Merkel was quoted as saying by the BBC. "Everybody therefore agreed that this will require a limited treaty change."

At the start of the summit, several EU leaders had protested against constitutional changes, fearful that the numerous national referendum that would require could undermine confidence in the bloc.

British Prime Minister David Cameron won his fight against a 5.9 percent increase of the EU budget in 2011. Backed by 10 EU members, including powerhouses Germany and France, London managed to push back that rise to 2.9 percent.

The two-day summit in Brussels ends Friday.