The European Commission has announced it will allow some EU member states to slow their pace of austerity cuts, amid concerns over growth.
France, Spain, Poland, Portugal, the Netherlands and Slovenia are all being given more time to complete their austerity plans.
France will get two more years to bring its budget deficit below 3% of GDP.
European Commission President Jose Manuel Barroso said the extra time must be “used wisely” to lift competitiveness.
The measures came as part of the European Commission’s country-specific recommendations.
Spain, Poland and Slovenia will also get two more years to bring down their budget deficits though spending cuts and tax increases.
The Netherlands and Portugal are having their timetables extended by one year.
Even Europe’s stronger economies, including Germany, are being urged to allow wage increases and increase flexibility in the jobs market to improve competitiveness.
Europe remains broadly in recession. The 17-member eurozone shrank by 0.2% in the first three months of the year, and is expected to register negative growth for 2013 as a whole.
The European Commission has announced it will allow some EU member states to slow their pace of austerity cuts, amid concerns over growth
There has been concern that the focus on fiscal consolidation in many EU states has worsened the economic situation.
Earlier, the OECD called on the European Central Bank (ECB) to do more to boost growth.
This month, the central bank in Frankfurt cut interest rates to a record low of 0.5% and said it was “ready to act if needed”.
In an official statement, the Commission said the extra time should be used to enact reforms.
“Giving more time for certain member states to meet their agreed objectives is designed to enable them to accelerate efforts to put their public finances into order and carry out overdue reforms,” it said.
“Reform efforts must be stepped up to credibly produce the required outcomes within the new deadlines and excessive deficits must be corrected.”
Jose Manuel Barroso stressed that the decision to allow some member states to slow the pace of austerity was made on purely economic and financial grounds, rather than for political reasons.
Speaking about the new timetable for France, he said the message remained “very demanding”.
“The extra time should be used wisely to address France’s failing competitiveness … I believe there is a growing consensus now in France about the need for those reforms,” he said.
Figures released earlier this month showed that France had entered its second recession in four years after the economy shrank by 0.2% in the first three months of 2013.
German Chancellor Angela Merkel says she doubts an agreement can be reached on the European Union’s 2014-2020 budget at the summit taking place in Brussels.
Angela Merkel spoke after negotiations on the 2014-2020 budget were adjourned until midday on Friday.
The opening of the summit was delayed for three hours because of stark differences over the budget plans.
Most EU members support an increase in the budget but several countries say it is unacceptable at a time of austerity.
Earlier, President of the European Council Herman Van Rompuy circulated a revised proposal for the new budget and said he believed that a compromise was possible.
“I think we’re advancing a bit, but I doubt that we will reach a deal,” Angela Merkel said.
She has previously said that another summit may be necessary early next year if no deal can be reached now.
French President Francois Hollande also cautioned that an agreement might not be possible.
But he added: “We should not consider that if we don’t get there tomorrow or the day after, all would be lost.”
German Chancellor Angela Merkel says she doubts an agreement can be reached on the European Union’s 2014-2020 budget at the summit taking place in Brussels
The 90-minute session late on Thursday followed a grueling day of face-to-face meetings between Herman Van Rompuy and each of the bloc’s leaders, followed by a flurry of backroom discussions.
Before suspending talks, leaders nominated Luxembourg’s Yves Mersch to the executive board of the European Central Bank.
The EU Commission, which drafts EU laws, has called for an increase of 4.8% on the 2007-2013 budget.
The UK is the most vocal of EU member states seeking cuts in the budget to match austerity programmes at home.
“No, I’m not happy at all,” Prime Minister David Cameron said about Herman Van Rompuy’s offer to cap spending at 973 billion euros ($1.2 trillion).
“Clearly, at a time when we’re making difficult decisions at home over public spending, it would be quite wrong – it is quite wrong – for there to be proposals for this increased extra spending in the EU.”
The statement called the rebate “fully justified”. The EU Commission and some EU governments want the rebate scrapped.
David Cameron has warned he may use his veto if other EU countries call for any rise in EU spending. The Netherlands and Sweden back his call for a freeze in spending, allowing for inflation.
Poland and its former-communist neighbors, which rely heavily on EU cash, want current spending maintained or raised.
Francois Hollande has also called for subsidies for farming and development programmes to be sustained for poorer nations.
France has traditionally been a big beneficiary of EU farm support.
Failure to agree on the budget would mean rolling over the 2013 budget into 2014 on a month-by-month basis, putting some long-term projects at risk.
A deal after intense negotiations which may continue into the weekend
Failure to agree and a follow-up budget summit
If no agreement is reached by the end of 2013, the 2013 budget ceilings will be rolled over into 2014 with a 2% inflation adjustment, amid uncertainty over long-term EU projects
European Union leaders have agreed to set up a single eurozone banking supervisor – a major step towards a banking union.
A legislative framework is to be in place by January 1st 2013, with the body starting work later next year.
The European Central Bank-led mechanism will have the power to intervene in any bank within the eurozone.
The deal appears to be a compromise between France and Germany, who earlier disagreed over the timing and over the number of banks the ECB would oversee.
The timetable remains important, because only when the body is fully operational will the eurozone’s rescue fund inject cash directly into ailing banks – so important for countries like Spain.
The deal was, at best, an uneasy compromise between the French and Germans and much wrangling lies ahead.
France and the EU Commission wanted joint banking supervision, with the ECB in the lead role, to become operational in January 2013.
But German Chancellor Angela Merkel stressed that national budget discipline should be the priority.
Germany had been at odds with the European Commission over the scope of the proposed ECB supervision. Under the draft plan, all 6,000 banks in the 17-nation eurozone would be included – Germany wanted it limited to the biggest, “systemic” banks.
Previously, the German government has expressed a desire to retain supervisory responsibility within Germany over the country’s Landesbanks – state-owned banks that play a key role in the economies and state finances of Germany’s federal regions.
Announcing the result of talks early on Wednesday, European Council President Herman Van Rompuy said the 27 EU member states had agreed to set up – by the end of this year – “a Single Supervisory Mechanism [SSM], to prevent banking risks and cross-border contagion from emerging”.
“Once this is agreed, the SSM could probably be effectively operational in the course of 2013,” he said.
EU Commission President Jose Manuel Barroso said that the ECB “will be able to intervene if needed in any bank in the euro area”.
With new supervisory powers the ECB would be able to act early on to prevent a systemically dangerous accumulation of debt on a bank’s balance sheets.
And once the legal framework is in place the new permanent rescue fund, the European Stability Mechanism (ESM), will be able to recapitalize struggling banks directly, without adding to a country’s sovereign debt pile.
ECB supervision will not extend to the UK – Europe’s main financial centre, but outside the euro.
It is more than a theoretical possibility that the interests of the UK and City of London in shaping financial rules will be systematically ignored or overridden, he says.
Both Germany and France appeared to be claiming victory in the negotiations.
German Chancellor Angela Merkel said that the agreement was that “banks must be supervised in a differentiated way. That means that some will be direct… at the ECB level and others indirectly, via the national authorities.”
She also said that ECB President Mario Draghi had told her it would be a matter of some months before the ECB was ready to take on its new role.
Angela Merkel confirmed that the EU bailout funds would not be used to directly inject risk-absorbing capital into troubled eurozone banks until the new supervisory arrangements were in place.
A decision about how to recapitalize Spain’s banks will be made in the next couple of weeks, according to Jean-Claude Juncker, who chairs the Eurogroup of finance ministers.
French President Francois Hollande said there had been no discussion of a possible request by the Spanish government for a bailout of its own finances.
But he said “the worst is behind us”.
“We are on track to solve the problems that for too long have been paralyzing the eurozone and made it vulnerable,” Francois Hollande told a news conference.
EU leaders agreed that the ECB’s new bank supervisory responsibilities would be strictly separated from its role in setting monetary policy.
The banking union plan is fraught with legal complications, as it would give more powers to the ECB and possibly weaken those of national regulators.
There is speculation that it could lead to treaty changes – something that has caused big headaches for the EU in the past.
The UK wants safeguards to protect the powers of the Bank of England.
Jose Manuel Barroso said the arrangement would be “as inclusive as legally possible for non-euro members to join if they want to”.
Earlier, Angela Merkel called for the EU to be given the power to veto member states’ budgets. She said the EU economics commissioner should be given clear rights to intervene when national budgets violated the bloc’s rules.
The EU’s highest court has been asked to rule on the legality of ACTA, the controversial anti-piracy agreement.
The Anti-Counterfeiting Trade Agreement (ACTA) has been criticized by rights campaigners who argue it could stifle free expression on the internet.
European Union trade head Karel De Gucht said the court will be asked to clarify whether the treaty complied with “the EU’s fundamental rights and freedoms”.
The agreement has so far been signed by 22 EU member states.
The European Commission said it “decided today to ask the European Court of Justice for a legal opinion to clarify that the ACTA agreement and its implementation must be fully compatible with freedom of expression and freedom of the internet”.
Several key countries, including Germany and Denmark, have backed away from the treaty amid protests in several European cities.
The EU's highest court has been asked to rule on the legality of ACTA
ACTA is set to be debated by the European Parliament in June.
While countries can individually ratify the terms of the agreement, EU backing is considered vital if the proposal’s aim of implementing consistent standards for copyright enforcement measures is met.
As well as the 22 European backers, the agreement has been signed by the United States, Japan and Canada.
Karel De Gucht told a news conference on Wednesday: “Let me be very clear: I share people’s concern for these fundamental freedoms… especially over the freedom of the internet.
“This debate must be based upon facts, and not upon the misinformation and rumour that has dominated social media sites and blogs in recent weeks.”
However, Karel de Gucht went on to say that the agreement’s purpose was to protect the creative economy.
“[ACTA] aims to raise global standards for intellectual property rights,” he said, adding that the treaty “will help protect jobs currently lost because counterfeited, pirated goods worth 200bn euros are currently floating around”.
ACTA’s backers face strong opposition within the EU. Viviane Reding, the commissioner for justice, fundamental rights and citizenship, took to Twitter to outline her worries on the treaty.
“For me, blocking the Internet is never an option,” she wrote in a statement.
“We need to find new, more modern and more effective ways in Europe to protect artistic creations that take account of technological developments and the freedoms of the internet.”
What is ACTA?
• The Anti-Counterfeiting Trade Agreement (ACTA) is an international treaty aiming to standardize copyright protection measures.
• It seeks to curb trade of counterfeited physical goods, including copyrighted material online.
• Preventative measures include possible imprisonment and fines.
• Critics argue that it will stifle freedom of expression on the internet, and it has been likened to the controversial Stop Online Piracy Act (SOPA).
• ACTA has been signed by 22 EU members, but is yet to be ratified by the European Parliament.