Eurozone leaders reach new deal without backing of Britain

EU leaders reach a new deal without UK
EU leaders reach a new deal without UK

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Story highlights

  • European Central Bank will manage bailout funds
  • EU leaders to add 200 billion euros to International Monetary Fund resources
  • Eurozone members reach agreement on new intergovernmental treaty
  • Britain and other three countries refuse to back new deal

A majority of European leaders agreed early Friday on a new deal to try to resolve the continent's debt crisis, but Britain refused to back a broader treaty change.

The 17 members of the eurozone, which share the embattled single currency, reached a deal for a new intergovernmental treaty to deepen the integration of national budgets. Six other EU nations supported the deal.

"We're doing everything we can to save the euro," President Nicolas Sarkozy of France said at a news conference in Brussels following a marathon summit meeting of EU leaders.

But the new plan, which leaders are aiming to have ready by March, did not get the backing of Britain

Three other countries -- the Czech Republic, Hungary and Sweden -- said they are willing to consider the plan after consultations with their Parliaments.

"We would rather have reformed the treaty with 27 members," Sarkozy said. But Prime Minister David Cameron of Britain demanded an "unacceptable" opt out clause related to the financial services sector, Sarkozy said.

The British waiver would have "undermined a lot of what we've done to regulate the financial sector," Sarkozy said. Instead, the eurozone countries, along with "anyone who wants to join us," are pushing ahead with the new intergovermental treaty, he said.

EU leaders reach deal without Britain
EU leaders reach deal without Britain

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How will world react to eurozone deal?
How will world react to eurozone deal?

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EU debt crisis stumbling block
EU debt crisis stumbling block

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Gaillard: Lack of confidence in the euro

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Forbes to Europe: Get off your duffs
Forbes to Europe: Get off your duffs

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"What is on offer isn't in Britain's interests, so I didn't agree to it," Cameron said at a briefing.

The new deal may raise concerns of the EU turning into a two-tier system, with some countries pursuing deeper integration than others.

But leaders had little choice but to act. The national debts of euro members, including Ireland and Greece, have pushed the common currency to the brink of collapse, forcing international lenders to swoop in with bailouts.

The budget cuts they have demanded have led to mass protests that brought down governments in both countries -- and they are not the only ones with worrying levels of debt. Larger economies like Spain and Italy have both come under pressure in financial markets recently, with their borrowing costs spiking to painfully high levels.

The French minister for European affairs, Jean Leonetti, had warned Thursday ahead of the summit meeting that the euro could "explode" and Europe could "unravel."

That would be a "disaster not only for Europe but for the whole world," Leonetti told the French TV station Canal+.

The new measures announced Friday by EU leaders to try to win back the confidence of panicky financial markets included handing over the running of the union's bailout funds to the European Central Bank and its new president, Mario Draghi. The central bank announced measures Thursday to try to revive the ailing European economy and ease credit conditions for troubled eurozone banks.

EU leaders have also decided to add 200 billion euros to the resources of the International Monetary Fund, said Christine Lagarde, the head of the IMF. The fund has assisted in the bailout of struggling European economies, like Greece and Portugal.

The new intergovernmental treaty that European leaders are putting together will be easier to ratify than a change to existing treaties, said Herman Van Rompuy, the president of the European Commission, the EU's executive arm.

Awareness of the urgency of taming Europe's debt woes extends beyond the continent's borders.

The U.S. Treasury secretary, Timothy Geithner, had been touring Europe ahead of the summit to underline the importance of the EU's bringing the crisis under control.

"I want to emphasize again how important it is to the United States and to countries around the world that Europe succeeds in this effort to build a stronger Europe, and I'm confident they will succeed," Geithner said in France on Wednesday.

On Thursday he met Prime Minister Mario Monti of Italy, who came to power when his country's government collapsed over its worsening debt crisis.

Geithner assured Monti that Washington supported his efforts to balance his country's budget.

Monti said he would meet President Barack Obama in Washington next month.

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