The President of the European Council Herman Van Rompuy spoke before the European Parliament on Tuesday, commenting on the decisions taken by the EU officials during the two day summit which ended last Friday. He emphasized that UK's opposition towards the fiscal agreement would hinder its implementation process, complicating it from the legal side.
"An intergovernmental treaty was not my first preference, nor that of the most of the member states ... It will not be easy, also legally speaking. I count on everybody to be constructive bearing in mind what is at stake," said the president.
Van Rompuy confirmed however that the deal reached by the remaining 26 Member States on tighter fiscal integration in the area should be finalized by March 2012. Some of the means of imposing budget discipline on the most heavily indebted countries will be introduced already on Tuesday while the question of the automatic sanctions still needs to be thoroughly discussed.
The president said that the 500 billion euro ceiling of the EU rescue funds, agreed upon during the summit, will also be revised in March 2012. Nevertheless, this statement goes against German Chancellor Angela Merkel's claims, who assured at the end of the Friday meeting that this amount will not be increased.
New Treaty agreed running into problems - FT
An FT article late in the US session noted that the new Treaty agreed by 26 EU nations is already running into problems. According to the FT - several EU leaders are warning of difficulties in pushing a far reaching pact through their national parliaments. Most of the countries warning of problems are outside the eurozone like the UK, but Irish opposition leaders are calling for a referendum on the new pact and such a vote would likely fail.
Spanish bond auction a modest success
Meanwhile, the news of the day in the debt markets was the Spanish bond auction, at which the country's Treasury managed to sell more than initially planned: 4.94 billion euros of 12- and 18-month papers at an average yield of 4.08% and 4.25%, respectively. Borrowing costs decreased in comparison to what the country had to pay in November.
Hopes of ESM expansion dashed
Reuters reported mid European session that hopes of the ESM expansion - the fund meant to replace the EFSF by mid 2012 - have been dashed after Merkel appears to reject raising upper limits of funding for ESM bailout mechanism, according to sources in her ruling German coalition, Reuters reported. Euro tumbled on the news to 1.3156 before a modest bounce.
Greece situation getting worse
Meanwhile, an IMF report warned that Greek structural reforms have not gone far enough, stressing that "things in Greece are getting worse." According to the official release, the most relevant headlines pointed "Greece continues to rely too much on taxes to close budget gap. Growth forecast cut to -3% from -2.75%. Greek authorities bringing program back on track but risks remain. IMF continues to support Greece but has no requests for a new Greek aid program (beyond the two already underway)."
