European Union fails to secure member states’ backing for a new eurozone accord

UK’s Prime Minister David Cameron has demanded a protocol to be inserted in the European Union treaty that will grant his country a number of exonerations on financial service regulations. (Reuters)

European Union leaders failed to get the bloc’s 27 members to back a change to the EU treaty and the 17 eurozone countries are now trying to reach their own accord, an EU official said Friday.

Other non-euro countries are invited to join the new treaty, which is meant to set up much tighter rules on national fiscal policy for the 17 countries that use the euro in an attempt to solve the worsening debt crisis, the official said.

The official was speaking on condition of anonymity to discuss confidential information.

Germany and France in particular had heralded the new treaty basis as an important step to emerge from the crisis, which has already dragged Greece, Portugal and Ireland into multibillion euro bailouts, but the failure to get all 27 EU countries to agree will likely be seen as a huge setback for European unity.

At the same time, the new treaty - which is likely to introduce more automatic sanctions for overspenders and force states to include debt brakes into their national constitutions - will draw the 17 country eurozone much closer together. States will be forced to give up some central parts of their sovereignty, especially when it comes to deciding how much money to spend.

Meanwhile, French President Nicolas Sarkozy labeled “unacceptable” set of conditions imposed by British Prime Minister David Cameron for the latter to back full EU treaty change.

“We would have preferred a deal at the level of the 27,” Sarkozy said after late-running talks at a crunch summit ended at around 5:00 am (0400 GMT).

“That wasn’t possible taking into account the position of our British friends,” he added.

Sarkozy said that “in order to accept treaty revision among the 27 EU states, David Cameron asked us − something we all judged unacceptable − for a protocol to be inserted into the treaty granting the United Kingdom a certain number of exonerations on financial services regulations,” Sarkozy said.

“We could not accept this, since we consider, quite on the contrary, that a part of the world's woes stem from the deregulation of the financial sector,” Sarkozy added.

“If we had accepted a derogation for the United Kingdom, that would mean to throw into question a large part of the very necessary work done to regulate financial services,” he said.

“I’m not saying that is Cameron’s position,” Sarkozy added.

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