Romanian President Traian Basescu and 24 further European Union countries' leaders signed this morning (Fri) the fiscal stability treaty at the European Council in Brussels.

The treaty was not signed by the leaders of the United Kingdom and the Czech Republic, which decided to stay away from the pact that will give extended powers to the European Commission over the member states' national budgets.

The treaty imposes harsh fiscal discipline in the EU countries, such as setting the limit of the structural budgetary deficit to 0.5 per cent, and the level of the public debt at 60 per cent of gross domestic product (GDP).

The countries which signed the treaty must include the new provisions in their national legislation, otherwise, the European Union Court of Justice can be notified in this respect.

Failing to respect this procedure can lead to a fine of maximum 0.1 per cent of the country’s GDP.

The treaty was agreed upon on 30 January.

The new treaty sparked unions’ protests that denounced the new budget constraints, as they will amplify the effects of the austerity measures. In 2010, Romania cut public wages by 25 per cent and introduced a five per cent tax on pensions, increasing also VAT from 19 per cent to 24 per cent, including basic food products. Public expenditure has been slashed and social benefits cut, a situation that increased the poverty levels to 41 per cent, the highest level in the EU, according to Eurostat.

Romania Times