EU Agrees To Agree

It seems odd to many journalists that the UK is not (does not need to be) involved in the EU agreement to complete a banking treaty by March. The Treaty will cause at least 26 member countries to commit to a new set of financial regulations, but they also receive Recovery Assistance from the IMF.  The UK has remained separate from the Euro currency commitment for 20 years and their "No" vote on the new Treaty is consistent with their long-standing currency position.

"At least 23 of the member states of the European Union will be part of this agreement and possibly it will be 26," European Commission President Jose Manuel Barroso said.

The EU leaders agreed that the eurozone, together with some other EU countries, would provide up to euro200 billion ($268 billion) in extra resources to the IMF, to be used to help European countries in dire straits.

The new agreement - and the new rift - came on a now-clouded anniversary, 20 years to the day after the treaty that led to the creation of the euro was drafted. That agreement, in turn, grew out of ambitious post-World War II efforts to unite a bloodied continent.

Governments participating in the new treaty agreed to have balanced budgets, calculated as an annual "structural" deficit of no greater than 0.5 percent of gross domestic product. An unspecified "automatic correction mechanism" will punish countries that break the rules.

To prevent excessive deficits, countries will have to submit their national budgets to the European Commission, which will have the authority to request that they be revised.

Complicating their negotiations, Cameron threatened to prevent EU bodies, such as the European Commission and the European Court of Justice, from taking on responsibilities of enforcing treaties made by fewer than all 27 members. But Merkel said there was legal leeway on the issue.

Germany and France insist that the best way to regain market trust is to beef up financial governance of the eurozone countries and their budgets.

But most economists agree that won't be enough: To regain the trust of investors in the short term, they say, the eurozone needs to have enough money on hand to guarantee that countries won't default on their debts."   http://www.ap.org/  ("All EU nations but UK open to joining new treaty")

Germany and France are gaining traction as they continue to be the conduit between the East & the West.  The UK remains strong in their position of seeming isolationism, but they benefit also by the strengthening of the Euro and a strengthenned relationship with the IMF.  The cost of US Treasury products have gone down  as a sign of the ECB's ability to establish a common banking system nearly as safe as the US from default, theoretically speaking.

Mohamed El-Erian of Pimco, a US bond expert, has a straight-forward perspective: http://www.bloomberg.com/video/82417768/