Draft treaty: fine euro states for weak debt rules

Europes highest court should be able to fine states that fail to adopt sufficiently strict laws against overspending, according to the latest draft of a new eurozone treaty.The fines of as much as 0.1 percent of a countrys gross domestic product were not foreseen in previous drafts. The new accord is the 17-nation eurozones latest attempt at fighting a worsening debt crisis.The currency bloc hopes it will also be endorsed by European Union states that do not use the euro, except the U.K, which has already ruled out joining.Under the accord, all eurozone states are required to include a so-called balanced-budget rule or debt brake into their constitution. Those would cap structural deficits at 0.5 percent of economic output, a limit that may only be exceeded in a severe recession or under exceptional economic circumstances.The debt brakes also have to contain a correction mechanism, a series of measures that would automatically cut government spending if the deficit limit is exceeded.Eurozone leaders hope that the stricter budget rules, which go far beyond the 3 percent deficit limit set out in the main EU treaty, will help convince investors that the mistakes that led to the current crisis wont ever be repeated. They were forced to set up a separate accord after the U.K. opposed changes to the blocs main treaty.The latest draft of the treaty, obtained by the Associated Press on Friday, says eurozone governments could take a state to the European Court of Justice if they suspect it of not having sufficiently strict measures to keep its deficit within the new limits.It says the court could then impose a fine of up to 0.1 percent of GDP, which would be paid into the eurozones new bailout fund, the European Stability Mechanism.