As I expected, from Reuters, the UK has bucked the treaty changes. I assume this is relation to the Tobin tax:
The European Union failed to secure backing from all 27 countries to change the EU treaty at a summit Friday, meaning any deal will now likely involve the 17 euro zone countries plus any others that want to join, three EU diplomats said.
An agreement at 27 fell through after British Prime Minister David Cameron demanded concessions that Germany and France were not willing to give, one of the officials said.
During nearly 10 hours of talks that lasted into the night, EU leaders did manage to reach agreement on a ceiling for the size of the euro zone’s permanent bailout fund, the ESM, saying it would be capped at 500 billion euros.
That figure will be reviewed in July next year, when the ESM is due to come into force, the diplomats said.
The leaders also agreed to explore the idea of providing bilateral loans to the International Monetary Fund totalling 200 billion euros, with 150 billion of that coming from the euro zone , to bolster IMF resources to tackle Europe’s debt crisis.
The UK outcome certainly isn’t a surprise. David Cameron has made it very clear he is willing to veto anything he didn’t see as UK positive:
Prime Minister David Cameron has said he would have “no hesitation” in wielding Britain’s veto to block an EU treaty to resolve the eurozone crisis if it did not meet UK requirements.
….
Answering questions during a visit to Hounslow in west London before departing for Brussels, Mr Cameron said: “I will be doing my best for Britain and I hope that if we get a good deal that will be good for Britain. But if I can’t get what I want, I will have no hesitation in vetoing a treaty at 27 because I am not going to go to Brussels and not stand up for our country.”
Given that the UK is out there will be no treaty change, however Reuters is reporting that the 17 Euro nations have agreed in principle to support tougher sanctions.
The EU leaders, meeting in Brussels, agreed on automatic sanctions for euro area deficit offenders unless three-quarters of states vote against the move, and approved a new fiscal rule on balanced budgets to be written into national constitutions.
“There is a deal between leaders on the new fiscal compact,” an EU official told reporters.
I will wait for some more details about exactly what has been agreed upon, but it appears to be austerity all round by the looks of that.
Something that Draghi mentioned in his press conference was a new round of banking stress test results. They have been released and , not unexpectedly, the European banks need even more capital:
European banks are in need of cash, and will have to find some €114.7 billion to top up their capital reserves, according to a stress test carried out by the European Banking Authority. The EBA released the results of its analysis of capital requirements of European financial institutes on Thursday evening.
“The EU-wide recapitalisation exercise is an important element in strengthening European banks’ position in the current environment characterised by heightened systemic risk arising from the sovereign debt crisis,” the EBA said in a statement.
The EBA will demand that German banks come up with €13.1 billion to satisfy the new core capital ratio of 9 percent recently agreed to by European leaders. Banks have until mid-2012 to fulfil the requirements. The total needed is higher than the €106 billion estimated in October primarily because of the increased needs of banks in Germany, Austria, Belgium and Italy.
To add to the surrealism of Draghi’s press conference the EU demands that they keep lending while re-capitalising:
European regulators warned banks not to cut lending or inflate capital levels artificially as they ordered the region’s financial firms to raise 114.7 billion euros ($153 billion).
The European Banking Authority told lenders yesterday to bolster their Core Tier 1 capital ratios to more than 9 percent of risk-weighted assets by the middle of next year to reassure investors the region’s banks can withstand the debt crisis. The EBA told banks to raise the money from investors, retained earnings and lower bonuses. Failing that, companies may sell assets, provided the disposals don’t limit overall lending to the “real” economy, the EBA said in a statement.
It’s hard to go on….Not surprisingly sovereign bonds are unwinding along with CDS.