Schäuble confident after EU deal

German finance minister Wolfgang Schäuble has said he is confident that agreements reached at an EU summit this week will solve the euro zone's debt crisis.

European leaders agreed yesterday to draft a new treaty for deeper economic integration in the euro zone, although Britain, the region's third largest economy, refused to join the 17 euro states and nine other EU countries in a fiscal union.

The plan triggered anxiety in Brussels as diplomats questioned the feasibility of the initiative and

"I am certain that we will be able to handle the debt crisis in Europe with the agreed, far-reaching measures on institutional reform of the European currency union," Mr Schäuble wrote in a guest contribution for Focus magazine.

Mr Schäuble said Europe had always emerged more strongly from crises and that was important for Germany, the EU's biggest economy. "If we act as individual nation states we can at best delay our loss of significance, but we would not be able to prevent it," he wrote.

The move to create an international treaty outside EU law to toughen economic surveillance in the euro zone presents a threat to the Government as it may lead to a referendum in Ireland.

Taoiseach Enda Kenny declined to express a view on the likelihood of a vote and insisted he would await the advice of Attorney General Máire Whelan. However, Minister of State for European Affairs Lucinda Creighton said there was a 50-50 prospect of a referendum.

Despite repeated efforts to put a positive slant on the new deal, high-level euro zone sources expressed scepticism. Saying the plan to create a non-EU structure to oversee EU budget rules was fraught with legal uncertainty and numerous other drawbacks, the sources said it was far from clear that the scheme would work.

However, German chancellor Angela Merkel insisted the deal marked a breakthrough. “We would prefer to have everything regulated in treaties but what counts for me . . . is that we were able to achieve everything we wanted for the euro.”

With an anticipated new intervention by the European Central Bank still awaited, concern was expressed that moves to bring forward the introduction of a new bailout fund by one year might still leave the EU authorities short of lending capacity next year.

Although EU leaders backed a separate plan to boost the resources of the IMF by €200 billion, its success depends on countries like China and Brazil stepping forward with aid.

The 10-hour negotiation in Brussels broke up before 5am yesterday. The talks resumed later in the morning and continued until early afternoon. Mr Kenny said the summit was exhausting but declared happiness with the outcome and said the agreement would protect and defend the euro zone.

The question of a possible referendum was one that many countries would have to consider, he said. “There is a great deal of technical and legal work that needs to be done. Ireland is not alone in that.”

The Government fears defeat in any referendum, which would be required if the treaty proposal was deemed to alter the essential scope or objectives of the EU communities.

A high-level EU source who was deeply involved in preparations for the summit said Irish officials repeatedly argued against treaty change, saying any vote would be doomed to rejection.

EU leaders decided to create a new intergovernmental treaty after British prime minister David Cameron said he would not back any change to the Lisbon Treaty without a concession for the City of London financial market. His intervention went down badly with other leaders, who rejected his plea and quickly resolved to take the alternative route.

“Politically speaking, for people on the continent, where the banks are considered the root of all evil, it was the wrong argument for the wrong people,” the EU source said. “Politically he was dead from the start.”

The move has isolated Mr Cameron in Europe. Only Hungarian prime minister Viktor Orban backed him initially but he changed his mind yesterday.

All euro zone countries will take part, as will most other non-euro countries. Sweden and the Czech Republic will consult their parliaments before deciding.

Mr Cameron was congratulated by Tory MPs, even by those who wanted him to go further by seeking the repatriation of powers over employment law. Still, divisions opened within their coalition partners in the Liberal Democrats.

Additional reporting: Reuters