Europe is able to forge a fiscal union

Associated Press

BRUSSELS

Working almost to exhaustion and persuading countries one by one, European leaders agreed Friday to redefine their continent — hoping that by joining their fiscal fortunes they might stop a crippling debt crisis, save the euro currency and prevent worldwide economic chaos.

Only one country said no: Britain. It will risk isolation while the rest of the continent plots its future.

The coalition came together in a marathon negotiating session among the 27 European Union heads of government — hard bargaining that began with dinner Thursday evening and ended after 4 a.m., when red-eyed officials appeared before weary journalists to explain their proposed treaty.

It was a major step forward in the long, postwar march toward European integration. It was two decades ago, on Dec. 9 and 10, 1991, that European negotiators drafted a treaty in Maastricht, Netherlands, to unite their politics, create a central bank and, one day, invent a common currency.

Friday’s agreement — 23 countries are in favor and three more say they are open to the idea — would force countries to submit their budgets for central review and limit the deficits they can run.

The hope is that it will stem a crisis over sovereign debt that consumed Greece, spread to Ireland, Italy, Portugal and Spain, and threatens to explode into a worldwide financial crisis capable of pushing the global economy into recession.

To prevent excessive deficits, countries in the treaty will have to submit their national budgets to the European Commission. They must also bring their budgets close to balance.

Germany and France insist that fiscal union is the best way to regain market trust, badly shaken by the escalating financial crisis. Most economists think it will not be enough.