This Monday European leaders took a step toward establishing a closer European financial union with strict fines for countries who do not take adequate steps to restrain their spending.
While the treaty is only compulsory for the 17 Eurozone members, Denmark and seven other EU countries not using the single currency have decided to sign up for the new regulations.
“I think the fiscal compact that was agreed yesterday is sensible for Denmark because it creates security about the European and Danish economies,” the Europe minister, Nicolai Wammen, wrote on his Facebook page.
“Seventy percent of Danish exports are to EU countries, and almost 500,000 workplaces are dependent precisely on these exports. Therefore, the deal is of great importance for Danish businesses and workers.”
The new treaty, the fiscal compact, was designed to prevent Europe from developing another debt crisis by forcing countries to maintain stricter budgetary discipline.
The main points of the treaty limit countries to a structural deficit of no more than 0.5 percent of GDP and accumulated debt of no more than 60 percent of GDP.
Countries that break these limits, and do not take the necessary action to bring their spending under control, can be fined up to 0.1 percent of their GDP by the EU courts. Countries using the euro will pay the fines to the bailout fund, the EFSF, while non-euro countries will pay to the common EU budget.
The new budgetary rules have to be enshrined in law by the parliaments of the countries that have signed up – so far all the EU member states bar the UK and the Czech Republic.
The law will probably pass in Denmark after opposition parties Venstre and Konservative said they would support the coalition government.
But three parties – the far-left government support party Enhedslisten, the Euro-sceptic Danish People’s Party and the libertarian Liberal Alliance – are opposed to joining the fiscal compact.
“There is no way we could vote in favour of it,” Nikolaj Villumsen, an Enhedslisten MP, told Politiken newspaper.
“The financial compact forces countries to adopt a bourgeois politics of austerity that will just make the crisis worse, both in Denmark and in Europe. Helle Thorning-Schmidt was voted for by Danes on a platform of creating jobs, but this pact would cut back spending.”
Both Enhedslisten and Dansk Folkeparti also argue that Denmark loses sovereignty by having the EU watch over its budget, meaning that Danish participation can only be approved via a referendum.
