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EU toughens budget rules but stalls on Greece

WROCLAW, Poland — The European Union's 27 countries overcame a year of infighting to agree Friday to tougher budget rules that make it easier to punish overspending governments, but they failed to produce any new measures that might contain the debt market turmoil threatening the EU.

Although the new rules will not ease immediate market concerns about debt, they are a first indication that Europe's states are willing to give up some sovereign powers to bolster longer-term confidence in the region.

The yearlong delay and the complicated voting procedures that define the final deal, however, suggest more progress will be hard to come by.

"I don't say that it is perfect," European Central Bank president Jean-Claude Trichet said of the compromise deal. "But it is a very significant improvement."

Under the new rules, it will be easier to sanction governments that breach the EU's limits on debts and deficits because, in most cases, a state would have to rally a majority of governments to stop the punishment. That is a reversal of powers, since until now, a majority was necessary to impose sanctions. Governments that are found to ignore warnings can also be punished.

U.S. Treasury Secretary Timothy Geithner attended Friday's informal meeting — the first time for an American treasury chief and an indication of fears that Europe's turmoil will hurt the global economic recovery.

Yet Friday's meeting produced little concrete progress toward snuffing out the more immediate crises in Greece, Ireland and Portugal, which have needed international bailout loans to avoid defaulting on their debts. Eurozone officials are also trying to keep default fears from pushing Spain or Italy, regarded as too big to bail out, into default.

Eurozone officials said they would not decide until October whether Greece had met conditions to receive the next installment from its original $151 billion bailout, required to keep it from a default that could trigger wider financial havoc among Europe's shaky banks.

They also could not agree to resolve a dispute over Finland's demand for collateral to cover its contribution to a second, $150 billion bailout agreed upon when the first did not put Greece back on its feet.

EU toughens budget rules but stalls on Greece 09/16/11 [Last modified: Friday, September 16, 2011 10:01pm]
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