The German and French attempts to get all 27 states in the European Union to agree to treaty changes have been halted after objections from the UK.
The treaty changes included a tax and budget pact for all 27 EU member states, but UK Prime Minister David Cameron insisted that the UK be exempt from some financial regulations.
Analysts expected Cameron to take this hardline stance in light of pressure from ministers that wanted him to ensure the UK’s sovereignty and protects its interests in light of a closer eurozone union.
The move for all 27 states to sign a treaty was dropped in light of UK opposition, and 23 states will instead adopt an accord with penalties for breaking budget rules.
The 23 states include all EU states that use the euro.
Cameron said of the new 23-state pact: “We wish them well.” He said that he recognised that all countries must do what they have to in order to pursue economic growth, but that he judged it “not in Britain’s best interests” to take part in the treaty.
Because of the UK’s veto, the new tougher rules on spending and budgets that countries have agreed to will not be held in place by an EU treaty. The new rules are simply a treaty between sovereign states.
Analysts predict that the new treaty will be easier to set up without the restrictions of the EU, but less rigorous.
The treaty, despite not being EU-wide, is an important step for Europe’s closer integration, and places binding rules with consequences for countries who overspend or do not manage finances according to regulations.
The discussions fleshing out the details of the new fiscal pact are expected to continue very soon, with EU leaders aiming to work everything out by March 2012.
One measure that has already been agreed upon by EU leaders is that countries will provide more money to the International Monetary Fund (IMF), which will help fund bailouts.
While the deal marks a productive measure at a “do-or-die” summit meeting for the eurozone, it did nothing to lift global markets, which were down after an announcement from the European Central Bank on Thursday.
While leaders sat through a marathon 10 hours of talks, Cameron’s insistence that London be exempt from regulations to the financial sector made an EU treaty impossible.
French President Nicolas Sarkozy said simply, “We could not accept this,” and that it was the sticking point which resulted in the eurozone breaking off to form their own separate deal.
The eurozone will be joined by at least six, and possibly eight, other countries.
While the UK and Hungary have firmly stated their intentions to take no part in the treaties, Sweden and the Czech Republic have said that they will consult their parliaments before making a decision.