The government feels that the 'golden rule' on balanced budgets, which is at the core of the Fiscal Pact agreed by all but two EU member states last week, should be entrenched in the Constitution with a two-thirds majority, Prime Minister Lawrence Gonzi told Parliament this evening.

Reporting on his participation in last week's EU heads of government meeting, Dr Gonzi told the House: "The signing of this treaty was an important step towards the restoration of confidence in the Economic and Monetary Union. This treaty, once it comes into force, should have a profound and long term impact".

That impact, he said, would be in the restoration of stability and confidence, better coordination of economic policies and better governance of the eurozone.

The pact will introduce new fiscal rules for all eurozone member states, forcing them to move towards a balanced budget through an obligation to cut the deficit by at least 0.5 per cent of GDP every year. It also provides for the introduction of automatic sanctions on those member states breaching deficit and debt rules.

Dr Gonzi noted that both sides of the House agreed that the provisions of the Fiscal Pact should be entrenched in the Constitution and he reiterated that once talks on the workings of the pact were concluded in the EU, talks would be started between the government and the opposition on the wording of the Constitutional amendment.

In his statement, Dr Gonzi noted how the focus of last week's meeting was on economic growth and job creation, rather than on some crisis.

The EU, he said, was taking the necessary measures to return to growth. Fiscal consolidation, he said, needed to come about hand in hand with growth and job creation as well as an improvement in competitiveness. This was something which Malta had always advocated.

Through its actions, Dr Gonzi said, the EU was also underscoring responsibility and solidarity - the responsibility of individual states as well as the solidarity among all states towards their common good. The Fiscal Pact was a major step towards the individual responsibility of all states while the European Financial Stability Mechanism had been a major step towards solidarity. Both were tools towards the ultimate aim of ensuring growth and job creation for the benefit of the people of Europe, Dr Gonzi said.