The first draft of a new treaty setting tighter budget rules for the 17 eurozone countries — and any other EU country that wants to join — was sent to governments on Friday, European Union officials said.
Formal discussions on the new treaty with national governments will start next Tuesday, with a second round of talks scheduled for the first week of January, the officials said. The officials, who stressed that the draft was likely to be modified during the negotiations, declined to be named in line with the EU's briefing policy.
The U.K., which was the only European country which has refused to sign up to the new treaty, will have observer status in the talks.
Allowing the U.K. to observe the talks is a concession to Prime Minister David Cameron, who alienated his European counterparts at their summit last Friday when he blocked changes to the current EU Treaty. Merely changing the existing treaty, rather than setting up an entirely new one, would have made the new rules easier to enforce legally.
The new treaty will require ratification from at least nine countries to come into existence. Participating non-euro states can decide whether and when they want to submit to the new rules.
Under the new treaty, which governments hope will help the eurozone emerge from its debt crisis, states will be obliged to include debt brakes in their national constitutions. States can send a fellow government to the European Court of Justice if they believe its debt brake is not effective.
The new treaty also aims to make it more difficult for states to stop penalties against countries whose deficits are higher than the 3 percent of economic output allowed under EU rules.
That, however, is tricky, because the procedure for determining whether a country is in excessive deficit is stipulated in the current EU Treaty, which supersedes all other accords.
The draft appears to have found a way — albeit a complicated one— around that legal tangle. Under the current EU Treaty, the European Commission can declare a country to be in excessive deficit — a move that forces the country to spell out in detail how it will bring down its deficit and debt or face sanctions — only if a qualified majority of EU countries agree.
That provision allowed states to stop sanctions on overspenders, ultimately facilitating the debt crisis that started two years ago in Greece and has since spread to Europe's core.
European leaders wanted to simplify this procedure by giving the Commission the right to declare a state to have an excessive deficit unless a qualified majority of countries vote against it. But that would have conflicted with the existing treaty, making the new rules illegal and impossible to enforce.
To get around that, the draft of the new treaty introduces an extra step. Ahead of the formal vote on the excessive deficit procedure, eurozone states should meet and decide to vote as a bloc in support of the Commission, unless a qualified majority of the 17 disagrees.
