A new Treaty on “Stability, Coordination and Governance in the Economic and Monetary Union” was passed by representatives of 25 Member States of the EU (only the UK and the Czech Republic were absent) at a special session of the European Council on Monday, January 30.

The key novelty is the insertion in the national law of the member states of the so-called “Golden rule” limiting the annual structural budget deficit of a Member State to 0.5 percent of GDP. Other provisions give a more binding character to fiscal discipline commitments already taken.The treaty will be signed in March and will enter into force once it has been ratified by at least 12 member states of the euro zone. The aim is to incorporate it into EU law within five years of its entry into force.The fiscal discipline imposed by the new Treaty is expected to push Germany into accepting a more decisive support for EU member states facing financial crisis. It also should help the ECB to intervene more ambitiously in actively defending the Euro.The new Treaty is based on existing articles of the European Treaty (the Lisbon Treaty), in particular articles 121, 126 and 136, and gives Treaty status to some provisions of the so-called ‘Six Pack on economic governance’ that the European Parliament, Commission and Council agreed on last year. The Six Pack consists of measures and procedures which aim to prevent an excessive budget deficit, to ensure an effective budgetary surveillance, and to correct excessive macro-economic imbalances. Lastly, it provides for sanctions in case of non-compliance.