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Eurozone finance ministers yesterday reached agreement on the key mechanism by which they will operate the majority of the €750bn bailout fund for euro members. Under the agreement, a “special purpose vehicle” capable of raising up to €440bn, will be based in Luxembourg and be backed by individual guarantees provided by all 16 members of the Eurozone, based on their shares in the ECB. Member states have also committed to guarantee an extra 20% beyond their share in the ECB, in case some countries are unable to provide financial guarantees due to economic difficulties of their own.

EU finance ministers also agreed new measures to step up EU economic governance, including the controversial proposal to submit member states’ budgets to national finance ministers for ‘peer review’, and to the Commission, before they are submitted to national parliaments, and new sanctions for member states that break the EU limit of a 3% budget deficit. It is not yet clear what shape these sanctions will take but EU President Herman Van Rompuy, who is leading a taskforce to establish an EU ‘economic government’, said that yesterday’s talks primarily concentrated on financial sanctions, as non-financial sanctions would involve changing the EU Treaty. La Tribune quotes Van Rompuy saying, “We have not ruled out future Treaty changes, but we have focused on what we can do in the short term.”

Meanwhile, a separate proposal agreed yesterday will see the European Commission given the power to monitor and intervene in national economic statistics. PA quotes a UK official saying, “We originally rejected this idea, but …a lot has changed in the last few months, and people are ready to accept some things that they would not have done just a short time ago.”

The Times reports that the IMF has put further pressure on Eurozone governments to reform the euro’s rules. “The euro area fiscal framework needs to be substantially strengthened to deliver the collective fiscal responsibility required for a well-functioning monetary union,” it said.

Source: Open Europe

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