European Union governments set tougher rules on budget deficitsin the latest draft of a planned fiscal treaty, bowing to someobjections raised by the European Central Bank.

The blueprint, to be discussed on Jan. 23 by EU financeministers, will require a centralized “correction mechanism” to betriggered “automatically” in cases of “significant” deviations froma target structural deficit of 0.5 percent of gross domesticproduct, according to the draft dated Jan. 19 obtained by BloombergNews.

The pact also empowers the European Commission to set deadlinesfor budgetary convergence. It gives the European Court of Justicethe power to fine countries whose balanced-budget laws don't passmuster, while stopping short of the ECB's request that the courtmore broadly enforce the budget rules.

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