Angela Merkel had already advocated greater budget discipline in the run-up to the meeting. In Brussels, 25 EU member states signed up for the fiscal pact. It is particularly important "for those who see Europe and the euro zone from the outside, that we have accepted this additional commitment".

The member states agreed to introduce into their respective constitutions and national legislation a ceiling on the permissible level of new debt. Angela Merkel underscored the fact that this ceiling would be "of binding force and permanent character" with respect to the adoption of budgets.

In future the annual national deficit of an EU state may not exceed 0.5% of gross domestic product at market prices.

Any signatory state failing to comply with this provision can be taken to the Court of Justice. For legal reasons the European Commission itself cannot take a member state to court. In future, however, under fixed procedures the Commission will be able to ascertain non-compliance. Then one member state will take the offending state to the Court of Justice. The Chancellor reported that the EU states intend to specify the details of this procedure by March 2012.

The Treaty on stability, coordination and governance in the Economic and Monetary Union is also to be signed in March. In addition to the United Kingdom, which announced in December that it would not be signing the treaty, the Czech Republic has now stated that it will not be part of the treaty at this point in time.

Growth and employment

In addition to the fiscal pact, the heads of state and government of the EU member states consulted on the issues of growth and employment. Their main focus was on moves to combat youth unemployment and on the promotion of small and medium enterprises. "We agreed that young people must rapidly be given a good quality offer of employment or training of some sort if they find themselves unemployed after leaving school," said Angela Merkel. "All member states have undertaken to do so." She pointed to Germany’s experience with in-company training.

Re-directing available funds from Structural and Social Funds

The EU member states intend to invest more money in projects to trigger economic growth and create jobs for young people. To this end they aim to re-direct available funds from the Structural and Social Funds of the European Union. At present the Structural Funds have 82 billion euros that have not yet been specifically earmarked.

open popup Coordinated action within the European Union Photo: Bundesregierung/Denzel

"Funds that have already been allocated to member states will not of course be taken away," stressed the Chancellor. The countries may, however, rework their projects so as to facilitate access to loans for small and medium enterprises.

SMEs are the backbone of Europe’s economic success

In a Statement "Towards Growth-Friendly Consolidation and Job-Friendly Growth" the European Council highlighted the importance of small and medium enterprises (SMEs). For this reason member states aim to support these enterprises, for instance by introducing "project bonds" on a pilot basis. This should stimulate private financing of key infrastructure projects. All measures are designed to prevent the current credit crunch impacting negatively on businesses.

Completing the Single Market

The European Council sees the Single Market as "a key driver for Europe’s economic growth". That is why it is vital to make better use of the opportunities offered by the Single Market, not least the potentials of EU legislation in areas such as services, explained the Chancellor.

With the exception of Sweden, all EU member states have signed up for the growth initiative.