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European Leaders Agree to Closer Financial Ties, but Cameron Holds out

December 9, 2011 at 12:00 AM EST
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JEFFREY BROWN: Something gained, but was something also lost? European leaders agreed early today to tie their budgets ever closer and force fiscal discipline on individual nations.

But there was one big hitch, as the deal to save the euro currency also threatened to split Europe anew.

It was a late-night showdown in Brussels, as leaders of 27 European nations met deep into the early morning hours, struggling to reach a deal to shore up confidence in the common currency called the euro. In the end, 26 of the 27 member nations said they’d signed on or had agreed to consider a plan that would make it harder for countries to run up big deficits in the future and help countries now saddled with debt.

Christine Lagarde, managing director of the International Monetary Fund, outlined the major tenets.

CHRISTINE LAGARDE, International Monetary Fund: What is really encouraging today is to see that the members that will be party to the agreement have decided three key components.

Number one, they want to really consolidate their fiscal union. Number two, they have decided to accelerate the European stability mechanism. And, number three, they have decided to add to the resources of the International Monetary Fund by an amount of $270 billion that is to be confirmed within 10 days. So, that’s — that’s a really good step in the right direction.

JEFFREY BROWN: German Chancellor Angela Merkel, leader of Europe’s biggest economy, had been pushing hard for such an accord.

ANGELA MERKEL, German chancellor (through translator): I believe after long talks, there is a very important result, because we learn from the past and the mistakes, and we say, in the future, binding agreements, binding rules, more influence for the European Commission, more unity. That is our contribution to making the euro safe.

JEFFREY BROWN: But there was a very prominent holdout, as British Prime Minister David Cameron declared that his country wouldn’t be party to the deal.

DAVID CAMERON, British prime minister: If I couldn’t get adequate safeguards for Britain in a new European treaty, then I wouldn’t agree to it.

JEFFREY BROWN: Cameron said it was a question of protecting Britain’s national sovereignty.

DAVID CAMERON: Britain’s interests in the European Union, keeping markets open, free trade, selling our goods and services with rules over which we have a major say, all those things are protected. They don’t change.

But this new round of integration and special powers and surrenders of sovereignty for European countries and others that want to join the euro, they will be carried on outside the European Union treaty. So we will not be presenting this new treaty, when it’s agreed, to our parliament. It will not involve Britain.

JEFFREY BROWN: The British decision disappointed French President Nicolas Sarkozy. He said Britain’s demands for regulatory exemptions countered the goals of the European Union.

NICOLAS SARKOZY, French president (through translator): David Cameron asked for what we all considered as unacceptable: a protocol, within the treaty, allowing to exonerate the United Kingdom of a certain amount of regulation regarding financial services. Part of the problem of the world comes from the deregulation of the financial services.

JEFFREY BROWN: European leaders want the details of a final agreement nailed down by March. Today, financial markets seemed to react favorably.

Germans’ DAX index rose 1.9 percent, as stocks in France and Italy shot up as well. In the U.S., stocks opened on an upswing and finished out the day well up. The Dow rose more than 186 points to close at 12,184. The Nasdaq gained upwards of 50 points to close at 2,647.

It was good news at a time when U.S. markets have been struggling with Europe’s volatility. The Dow closed the week up 1.4 percent and the Nasdaq rose 0.8 percent.