Business

So What Exactly Is in the New Deal To Save the Euro?

All European Union states except Britain moved toward setting up a new treaty Friday, giving up crucial powers over their own budgets in an attempt to overcome a crippling debt crisis.

Included in the new treaty will be all 17 countries that use the euro. Nine non-euro states — Denmark, Latvia, Lithuania, Poland, Romania, Bulgaria, Hungary, Sweden and the Czech Republic — said they would consult their parliaments before joining in. In some of those countries, however, parliaments are less than enthusiastic.

As mentioned above, the U.K. gave a clear “no” after it failed to get the eurozone to approve special safeguards for its financial center from EU regulation.

The treaty is the eurozone’s latest attempt at dealing with the debt crisis that has recently threatened the survival of the currency. Germany and France in particular argued that only tough rules enshrined in a treaty would convince markets that all countries will be able to repay their debts and a similar crisis will never happen again.

How do they plan on achieving that?

  • Debt brakes in national constitutions: All 23 countries have promised to keep their deficits below 0.5 percent of economic output. That cap can be broken to counteract a recession or in other exceptional circumstances. The European Court of Justice will make sure all states’ debt brakes are effective.
  • More automatic penalties for deficit sinners. In the past, governments often protected their partners from being punished.
  • All states have to tell their partners in advance how much debt they plan to take on through bond sales.

But that’s not all; there are other details that they agreed on.

First, the eurozone, together with other willing EU states, has also agreed to give as much as €200 billion to the International Monetary Fund to help it rescue troubled nations.

Second, the eurozone’s permanent bailout fund, the European Stability Mechanism, will take over from the current rescue fund, the European Financial Stability Facility, one year ahead of schedule, in July 2012. Unlike the EFSF, the ESM has paid-in capital, similar to a bank, and is therefore more credible on financial markets.

Third, the ESM’s decision-making process was simplified in emergency situations, allowing struggling countries to get financial help if an 85 percent majority of capital holders agree. That is meant to stop small countries from blocking or slowing down urgent rescues, as has happened in the past.

Lastly, the eurozone eased rules that have forced banks and other private investors to take losses when a country gets a bailout from the ESM. The previous push to inflict losses on bondholders has been blamed for exacerbating the crisis.

However, there were a few provisions that failed to appeal to the majority of the eurozone nations.

For instance, eurozone leaders did not decide to boost the overall firepower of their own bailout funds, which is currently limited to €500 billion. They promised to reconsider that cap in March, shortly before the ESM comes into force.

Furthermore, they did not agree to more intrusive powers for the European Commission over the fiscal policies of wayward states, as had been demanded by European Council President Herman Van Rompuy and some nations. Instead, they promised to “examine swiftly” much more lenient proposals from the Commission.

They also did not allow the bailout funds to directly recapitalize failing banks. That could have prevented countries from taking on more debt when they have to bail out lenders.

But will any of this actually work?

Stock markets and the euro rose modestly in reaction to the deal, but many details remain to be worked out. Much will depend on whether the stricter fiscal rules can persuade the ECB to unleash massive funds to buy up bad eurozone debt.

The Associated Press contributed to this story.

Comments (17)

  • Pigpen
    Posted on December 10, 2011 at 4:31pm

    Article asks: “So What Exactly Is in the New Deal To Save the Euro?”

    What exactly? Well, EXACTLY, it puts power in the proper hands of unelected Eurozone officials who value intellectualism and empiricism over truth and religion. It EXACTLY takes ultimate power from elected officials and other relics of the whiteman’s backwards, feudal system and places it with those who know best. So if any of you out there still know how to PRAY, bend your knees and BEG that God intervenes and that in spite of the ballot stuffing neo-commies that the BNP sweeps into power in the UK’s Parliament; that the French elect Le Pen as President; and that YOU elect Ron Paul as Leader of the Free World! Because if you don’t WILLINGLY bend your knees now and PRAY, you will be UNWILLINGLY bent over by Z.O.G.!

    Report Post » Pigpen  
  • BlackCrow
    Posted on December 10, 2011 at 10:44am

    @ Jeannie Marshal

    One problem; the Chinese are no longer the creditor of last resort. They have seen the folly in throwing good money after bad. Now the largest holder of U.S. public debt is our own Federal Reserve Bank.

    The worlds economy is built on phony money and debt and it will collapse. Money that has value purely because the governments tell the masses that it has value. Then for the last 40 years all economic “growth” has been dependent on debt and that debt has been amassed from creation of money from thin air by banks. Anyone who has taken a college level economics class could see that this system would be very profitable to those who were in at the ground floor but as with any Ponzi scheme the late arrivals are going to loose big as the pyramid collapses.

    Report Post » BlackCrow  
    • sgtstubbs
      Posted on December 11, 2011 at 1:10pm

      The old currency as silver, coins but these were fazed out during the 60′s so money has no value now. Those who have silver can use it for tradiing, just something to think about. VALUE

      Report Post » sgtstubbs  
  • packsack54
    Posted on December 10, 2011 at 12:55am

    Sound like the story of Jack, trade ing a cow for those magical beans. I think it just going to be a big fairy tale in the end, and the little people will get their butts had to them. We better watch that the Federal Reserve keep out of it or we will be holding a empty bag in the end.

    Report Post »  
  • ALL4FREEDOM
    Posted on December 9, 2011 at 9:05pm

    Bravo to Britain for deciding not to give up her sovereignty to a bunch of bureaucrats. This scheme will not work. The problem cannot be “papered over” by printing more money. The Euro is doomed (and the dollar with it). ALL fiat currencies depreciate to zero eventually, and we’re just about there. The dollar is now worth a bit less than 2 cents; its decline accellerated rapidly once Nixon severed the last tie to gold in 1971. Ron Paul may be scary as a presidential candidate but he is dead on about two things: the Fed must go, and we need sound money for capitalism to function properly.

    Report Post »  
  • oldschoolgreen
    Posted on December 9, 2011 at 5:36pm

    This will solve nothing. Prediction; next month there will be some other horrendous catastrophe that will befall the hapless europeans and their monopoly money currency.

    Report Post »  
    • isobamamadd
      Posted on December 10, 2011 at 3:18pm

      If they accept this they will be selling out to the Devil. Bernanke,Front man for the Banking Cartels,is printing monopoly money like mad. What they want is security, land,minerals,even the union pension funds,till they set up the New World Orders New Bank the World wide IMF. Then they will collapse it,or it will collapse on its own, then they will come as the white knight to save the people in distress, problem being you will sit until your property taxes are due,and like 1929 the other wall street crash, property will be repossessed,allowing the Banks to Rent them out to you ..So the system ,can start over, only you, under agenda 21 never see private ownership of land again..Your Public lands will be hocked by the powers in Washington. The bankers will seaze those to,and all the minerals, oil,, water, and naturally they will control your food too..

      Report Post »  
  • qz2026
    Posted on December 9, 2011 at 5:23pm

    I had the same question when I was checking out why they market was up to high this morning. Look, they are either getting money from us or they are now beginning to print money. So, the whole world will have hyperinflation.

    Report Post »  
  • tbl10
    Posted on December 9, 2011 at 5:06pm

    So basicly these countries are giving up their sovereignty to Germany, which will be calling the shots since they are the most powerful. Does anyone else see the 4th Reich being created without a shot ever being fired. What a bunch of tools. I mean anyone with a brain can see this coming, I see George Soro’s hands all over this. We all know what how much he loved the 3rd Reich.

    Report Post »  
  • jeannie marshall
    Posted on December 9, 2011 at 4:26pm

    Somehow or the other, the US will end up with the largest amount of the bill to bail out EU Banks. We’ll even do as stupid a thing as borrow money from China to do it with more “economic easing” from the FED. I see no good outcome for any of this. Everytime the world has come this close to economic disaster, a war followed. That’s more of a likelihood than the EU overcoming their dilemma.

    Report Post » jeannie marshall  
    • qz2026
      Posted on December 9, 2011 at 5:26pm

      You are right. Progressives create wars to fix economies that they have ruined. Hummm, lets see Woodrow Wilson, FDR, now Obama is next. Funny thing that it is never the war that fixes the economy either. I agree, there will be a war and it will start in the Middle East and the outcome of that war will be either preying to Allah or not preying to Allah.

      Report Post »  
    • aewelch01
      Posted on December 10, 2011 at 2:52pm

      I agree a WWIII is coming soon. The most troubling question for me these days is, “who’s side will our corrupt political establishment say the American people are on”? Everytime I start debating that question at night, I have to take a damn pill to get to sleep and I always have a terrible nightmare. With all the manipulation of the Euro currency going on, I‘m still not sure if it’s just George Soros or if it is a concerted effort by the Fed as well? I wish I could just get a good nights sleep. I have a whole lot of preparing to do.

      Report Post »  
  • hauschild
    Posted on December 9, 2011 at 4:22pm

    How did these idiots ever think that having the same currency was going to fly, when you have all these separate governments that rule over people with different work ethics and beliefs and intelligence levels and motivations – on what they are entitled to? Seriously – you’re gonna tell me, with a straight face, that Malta and Germany are on the same plane on every level???

    It’s hilarious watching these fools trying to save something that is impossible to save. It basically allowed the less productive countries to live high off the hog for a few years, but now it’s coming crashing down upon them. It’s embarrassing watching grown people with fully developed minds who cannot come to grips with reality.

    Report Post »  
  • LOJ
    Posted on December 9, 2011 at 3:00pm

    Speaking of the Euro, we heard on AmeriRight that John Corzine transfered the 1.2 billion to an account in Great Britain and in their currency. Englands laws are different than ours and allow for the Transfer of money to buy the English pound. When the Euro fell Corzine and MF Global were bankrupted, yet Corzine doesn’t know where the money went, hes scratching is head in wonder. The money just up and vanished like a Fart in the Wind.

    Report Post »  
    • Dkoonz
      Posted on December 9, 2011 at 4:07pm

      Sounds like what my wife does with my money…lol…my paycheck just vanishes.

      Report Post » Dkoonz  

Sign In To Post Comments! Sign In

Sign Up For Our Newsletter!

Glenn Beck Radio

Listen to Glenn Beck 24/7 Listen Now
Restoring Love