EU leaders signed a new treaty to control budgets

EU leaders signed a new treaty to control budgets on Friday, vowing to turn the corner on the eurozone debt crisis, but new deficit shocks from Spain and the Netherlands threatened to spoil the party.

Leaders from 25 of the bloc's 27 nations -- apart from the Czech Republic and Britain -- signed the treaty at a ceremony in Brussels on the second final day of a summit aiming to shift the focus from crisis management to jobs and growth.

The treaty is “a strong signal that we are drawing lessons from the crisis and that we are focusing on the future of a politically united Europe,” said German Chancellor Angela Merkel, the main architect of the pact.

The countries signed up to a promise to anchor in their constitutions -- if possible -- rules to stop their public deficits and debt spiralling out of control in the way that led to the eurozone crisis.

The new treaty is “an important step in reinforcing the confidence in our economic and monetary union” and a “major step towards responsibility”, said EU president Herman Van Rompuy as he invited leaders to sign the document.

But amid the relief at progress made to overcome the crisis, new fiscal problems in Spain and the Netherlands -- one of the most outspoken critics of Greece's fiscal recklessness -- showed that dangers still lurk.

The Netherlands announced that its “provisional” public 2012 deficit would rise to 4.5 percent of gross domestic product from 4.1 percent forecast before, sparking a pointed rebuke from the European Commission.

“We think that the Netherlands is one country that has been very vocal when supporting the reinforcement of our fiscal surveillance rules,” said European Commission economy spokesman Amadeu Altafaj.

And Spanish Prime Minister Mariano Rajoy announced that his recession-mired country aimed to post a deficit of 5.8 percent of output in 2012, nearly twice the EU limit and well above what had been agreed with Brussels authorities.

While markets generally took the summit in their stride, some analysts warned that the pact does not fix fundamental problems in the bloc. The treaty is “a step forward in helping to set a framework for aligning budgets, but it does not resolve the underlying solvency problem and lack of growth that is currently causing so many problems in Europe,” said Michael Hewson at trading firm CMC Markets.

“Unless EU leaders can address that issue then all this summit has done is prolong the agony for economies like Spain, Italy, Portugal and Greece.” But despite the new concerns, a more relaxed set of leaders stressed the fact that for the first time for more than a year, the gathering was not billed as a crisis summit, as financial markets remain calm at present.

Helle Thorning-Schmidt, prime minister of Denmark, the current head of the EU, said: “for the first time in many, many months, this is not a crisis summit.” “We have tried to deal with the past and are now looking into the future and ... discussing how we create more growth and new jobs for Europe,” she told reporters on her way into the meeting.

“We are in the process of turning the corner on the financial crisis,” said French President Nicolas Sarkozy.

“It's the first normal summit for a couple of years,” said Finnish Prime Minister Jyrki Katainen.

In another “normal” development at a summit, Britain found itself at loggerheads with some of its larger partners, when a strategy for growth pushed by London received only limited welcome.

Several measures proposed by Britain and 11 others, such as a new focus on trade with the United States, Russia and China, were not incorporated into earlier drafts of leaders' statement, apparently leaving Prime Minister David Cameron furious.

Cameron acknowledged after the summit that he was “frustrated” initially but insisted that most of his proposals had eventually been included in the final communique.

“We made it clear that we should agree concrete steps at this meeting,” said the prime minister.

“Yesterday, I was frustrated that the draft summit communique did not do this. But today in Brussels .. we have made our voice heard.

The communique has been fundamentally rewritten in line with our demands,” he said.