BRUSSELS, Belgium - All European Union countries, except Britain and the Czech Republic, agreed Monday to sign up to a new treaty designed to stop overspending on the eurozone and put an end to the bloc's crippling debt crisis, while also pledging to stimulate growth across the region.
The new treaty, agreed at a summit of European leaders in Brussels Monday, is known as the fiscal compact and includes strict debt brakes and makes it more difficult for deficit sinners to escape sanctions. The 17-country eurozone hopes that the tighter rules will convince investors that all countries will get their debts under control and restore confidence in their joint currency.
"We have a majority of 25 that will now sign up to the fiscal compact," said Swedish Prime Minister Fredrik Reinfeldt.
Although the new rules only apply to the 17 euro states, the currency union was hoping to get broad support from the other EU states, in the hope that the accord could eventually be integrated into the main EU treaty.
Britain had already said in December that they wouldn't sign the new treaty. Reinfeldt said that the Czech Republic didn't sign up because of parliamentary procedural problems.
The Swedish prime minister said it he decided Sweden should join even though it does not use the euro because the new accord gives it more influence on policy within the currency union.
The summit also promised to stimulate growth and create jobs across the region, in a tacit acknowledgment that their exclusive focus on austerity has had painful side effects. Earlier Monday the meeting pledged to offer more training for young people to ease their transition to the work force, deploy unused development funds to create jobs, reduce barriers to doing business across the EU's 27 countries, and ensure that small businesses have access to credit. However there was no offer of any new financial stimulus.
"We must do more to get Europe out of the crisis," they said in a statement.
The European Commission, the EU's executive, says that there are still C82 billion in development funds that have yet to be allocated, and the statement from Monday's summit said they should be "rapidly" committed to projects focused on growth and job-creation.
Europe's debt crisis has put the continent and its leaders in an almost impossible situation. While they have to slash their deficits to reassure investors reluctant to lend to them, the debt crisis has also hammered the so-called "real economy," sending unemployment soaring. Many analysts, politicians and trade unions think that only government spending can restart growth.
Overall, 23 million people are jobless across the EU, 10 per cent of the active population. In Spain, unemployment has soared to nearly 23 per cent and closed in on 50 per cent for those under age 25, leaving more than 5 million people -- or almost one out of every four -- out of work as the country slides toward recession.
Even countries in the so-called European "core" -- which are generally better off -- are suffering. The French government was forced Monday to revise down its growth forecast for the year from 1 per cent to just 0.5 per cent.
In fact, many now fear that Europe is on the verge of another recession, and leaders gathering in Brussels said that while austerity is important, more needs to be done for growth. Economists often note that cutting spending is just one way to slash deficits; another equally important method is to boost growth, which increases the amount of money pouring into government coffers.
While the leaders meeting in Brussels focused on walking the fine line between reining in spending and stimulating growth, the elephant in the room was Greece.
Greece and its bondholders have come closer to a deal to significantly reduce the country's debt and pave the way for it to receive a much-needed C130 billion ($170 billion) bailout.
French President Nicolas Sarkozy said he hoped a final agreement on Greece will be achieved "in the coming days," either at a special meeting of eurozone finance ministers or leaders.
Negotiators for Greece's private creditors said Saturday that a debt-reduction deal could become final within the next week. If the agreement works as planned, it could help Greece avoid a catastrophic default, which would be a blow to Europe's already weak financial system.
But European officials are afraid that even that deal may not be enough to fix Greece's finances, with some blaming Athens for dithering on its promise to cut spending and introduce austerity measures.
