Europe moves ahead with fiscal union ~ #666 ~ The ESM's capacity will be capped at 500 billion euros $666 billion ...

Snip ~ The ESM's capacity will be capped at 500 billion euros ($666 billion), less than had been suggested was possible before the summit, and the facility will not get a banking licence, as Van Rompuy originally had proposed, due to German opposition.

One senior EU diplomat called British Prime Minister David Cameron's negotiating tactics "clumsy". Among other issues, he had sought a right to veto a proposed financial transaction tax, which may be voted through by a majority over the objections of the City of London financial centre.

Friday December 9, 2011

_Euro zone to seal separate treaty on fiscal union with others

_Britain blocks EU treaty change, only Hungary supports it

_ECB's Draghi: outcome good basis for 'fiscal compact'

_New pact will have stricter debt, deficit rules and enforcement

_Permanent euro zone bailout fund active from July 2012

Europe divided on Friday in a historic rift over building a closer fiscal union to preserve the euro, with an overwhelming majority of countries led by Germany and France agreeing to forge ahead with a separate treaty, leaving the EU's third biggest economy Britain isolated.

The outcome of a two-day European Union summit left financial markets uncertain whether and when more decisive action would be taken to stem a debt crisis that began in Greece, spread to Portugal, Ireland, Italy and Spain and now threatens France and even economic powerhouse Germany.

A new treaty could take three months to negotiate and may require referendums in some countries. Two ECB sources told reporters the European Central Bank would keep purchases of euro zone government bonds capped for now and not take extra action. Debt markets were wary. Interbank lending rates eased but Italian 10-year bond yields remained around 6.5 percent .

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Twenty-six of the 27 EU leaders agreed to pursue tighter integration with stricter budget discipline in the single currency area, but Britain said it could not accept proposed EU treaty amendments after failing to secure concessions.

After 10 hours of talks that ran into the early hours of Friday, all 17 members of the euro zone and nine countries that aspire to join resolved to negotiate a new agreement alongside the EU treaty with a tougher deficit and debt regime to avoid a repetition of the debt crisis in future.

The nine non-euro states said they would consult their parliaments, where appropriate, on taking part in the process. After a long night of wrangling, Britain's few allies melted away in the Brussels dawn.

"Not Europe, Brits divided. And they are outside of decision making. Europe is united," Lithuanian President Dalia Grybauskaite said in blunt English.

One senior EU diplomat called British Prime Minister David Cameron's negotiating tactics "clumsy". Among other issues, he had sought a right to veto a proposed financial transaction tax, which may be voted through by a majority over the objections of the City of London financial centre.

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