(Reuters) - EU officials laid out a new agreement to tighten fiscal rules for the euro zone and other participating EU countries on Friday, hoping to push ahead with deeper economic integration and get on top of the two-year-old debt crisis.
The eight-page draft agreement will be discussed by member states for the first time at a meeting in Brussels on Tuesday, with the aim of securing ratification from at least nine euro zone countries potentially by the end of January, a threshold that would bring the agreement into force as soon as March.
The deal -- dubbed a new fiscal compact by European Central Bank chief Mario Draghi -- was drafted after a summit on Dec. 8-9, when all EU leaders, except Britain's David Cameron, agreed that it was the right way forward.
While isolated in the immediate aftermath of the summit, Britain will be allowed to follow discussions on the new agreement as an observer, joining the other 26 EU countries as they negotiate the fine print of the deal.
It's quite clear: the UK will be there with observer status, an EU official told reporters. The UK said from the outset they didn't want to get involved in this text, so they will be there, but as an observer for the whole process.
The main aim of the agreement is to bind euro zone countries into tighter fiscal rules, including the need to keep their budget deficits below three percent of gross domestic product and their debt levels below 60 percent of GDP.
There is also a stipulation that countries should aim to keep their primary deficits -- which exclude the cost of debt financing -- below 0.5 percent of GDP over the economic cycle, an objective that has been called 'the golden rule'.
Participating countries that fail to meet the targets can be taken to the EU's highest court, the European Court of Justice -- an effort to enforce much stricter and more automatic sanctions on those that breach rules that have all too often been violated in the past, including by France and Germany.
Any contracting party which considers that another contracting party has failed to comply... may bring the matter before the Court of Justice of the European Union, article 8 of the 14 article draft agreement states.
The judgment of the Court of Justice of the European Union shall be binding on the parties in the procedure, which shall take the necessary measures to comply with the judgment within a period to be decided by said court.
That rule raises the possibility of Germany or another participating member state dragging another before the ECJ if there is a feeling that they have not done enough to transpose the stricter budget rules into national law.
SPEEDED UP PROCESS
In the coming weeks, representatives from the 26 countries expected to take part in the pact will meet to refine the details, with a final agreement expected in January.
European Council President Herman Van Rompuy, who chairs EU summits and has overseen efforts to get countries to commit to the new pact, has called another summit of all EU heads of state for late January or early February, by which time officials hope the compact will have been ratified by a quorum of states.
Once nine euro zone countries have ratified the deal, it will come into force and it will be binding on each subsequent country that ratifies it -- that means that Greece, for example, may not have to ratify it for months or even years, even if the pact has already come into force for the rest of the euro zone.
While EU officials have moved at lightning speed to draft the agreement, many question marks remain. There is every possibility of changes in the coming weeks, and it is far from certain that it will be enough to convince financial markets that Europe is on the way to resolving its debt problems.
However, Draghi has expressed his satisfaction with the direction EU leaders are going, vocal support which has suggested that the central bank may be inclined to step up purchases of euro zone sovereign debt in the coming weeks and months to help stabilise the situation.
And Britain, the chief sceptic of the deal, may also have reason to feel inclined to join it in time, or at least not to fear an impact on the EU single market from deeper integration among the rest of the EU -- a core British concern.
The deal explicitly states that: the contracting parties undertake to make recourse, whenever appropriate and necessary, to the enhanced cooperation on matters that are essential for the smooth functioning of the euro area, without undermining the internal market, a nod to British concerns.