French President Nicolas Sarkozy said at a news conference Monday that he and German Chancellor Angela Merkel have agreed on a series of reforms to address the Eurozone sovereign debt crisis. According to Sarkozy, the joint Franco-German proposal will be presented to EU President Herman Von Rompuy on Wednesday.
It is assumed that the new proposals will then be ready for the December 8-9 emergency EU Summit meeting.
At a news conference following the meeting Merkel, Sarkozy told reporters, “We want to make sure that the imbalances which led to the situation in the euro zone today cannot happen again."
Sarkozy also said, “"Therefore we want a new treaty, to make clear to the peoples of Europe, members of Europe and members of the euro zone, that things cannot continue as they are."
Although few details were provided, Sarkozy did hit the highlights of the proposed new EU treaty. "This treaty would contain the following things: We want automatic sanctions in the event of a breach of the rule on deficits below 3 percent (of GDP)," Sarkozy said.
"We want a golden rule that is reinforced and harmonized on the European level so that the budgets of all 17 (euro zone states) have a constitutional rule to ensure that national budgets move toward a return to equilibrium," the French President added.
Sarkozy told the press that the new treaty proposal would ideally include all 27 EU members but that there may also be a new treaty for the 17 Eurozone members which would include sanctions for states who fail to meet the 3 percent deficit rule, as well as a budget-balancing rules.
Sarkozy added that such a treaty would be ready by March of 2012.
Recall that the creation of a “fiscal union” has been a requirement for the ECB to take on a larger role in fighting the sovereign debt crisis. In addition, there are reports Monday that the ECB is preparing a plan to inject as much as €1 trillion into the system in an effort to end the credit contagion that has developed across the continent.
It has also been reported Monday that the U.S. Fed and other central banks may be preparing to invest between €100 and €200 billion into a fund that could be used by the IMF.
Stock markets are rallying on the reports and appear to be assuming that the crisis is about to come to an end.
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