March 2, 2012 / 1:20 PM / 8 years ago

Factbox - Main points of the EU fiscal compact

BRUSSELS (Reuters) - Twenty five European Union leaders signed a “fiscal compact” on Friday to prevent another debt crisis from happening in the future and to win back market confidence in EU public finances.

From the 27-nation EU, only Britain and the Czech Republic did not join the treaty, the main aim of which is to enforce more budget discipline.

The fiscal compact applies to euro zone countries in full. Non-euro zone countries have to observe only those elements of the treaty they choose to before they adopt the euro.

Below are the main points of the agreement:

- The budget of a country must be in balance or in surplus, which means that in structural terms - that is excluding one-off items and business cycle variations - the deficit cannot be higher than 0.5 percent of gross domestic product.

- Only countries which have debt to GDP ratios significantly below 60 percent can have a bigger structural deficit, but not more than 1 percent of GDP.

- If the budget is not in balance, automatic correction rules, written into national laws, must kick in.

- The balanced budget rule must be written into national law, preferably the constitution, one year at the latest from the day the fiscal compact enters into force.

- If a euro zone country does not write the balanced budget rules into its national law, it can be sued in the European Court of Justice and, if it does not comply with the Court’s ruling, it can be fined 0.1 percent of its GDP.

- The agreement will enter into force once 12 euro zone countries ratify it, or on January 1, 2013.

- A country with public debt higher than the EU limit of 60 percent of GDP has to reduce it by one twentieth a year as a benchmark.

- Euro zone countries will coordinate national debt issuance plans in advance.

- Only countries that have ratified the fiscal compact and written the balanced budget rule into national law will be eligible for euro zone bailouts from the European Stability Mechanism.

Reporting by Jan Strupczewski; Editing by Rex Merrifield/Catherine Evans

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