Europe's financial diet: EU signs crucial fiscal treaty

Hot on the heels of the ECB’s half-trillion-euro handout to 800 banks, 25 EU member states have signed a fiscal treaty committing them to balance their budgets. The move has stoked public anger, with anti-austerity rallies breaking out across Europe.

The controversial fiscal treaty has been signed at a European Union summit taking place on March 1-2 in Brussels. The agreement introduces new budgetary regulations to which signatories must strictly adhere. The document also carries automatic sanctions for any country failing to comply with the rules.

The two countries abstaining from signing the treaty were the Czech Republic and the UK. Ireland has signed the document, but will hold a referendum on whether to ratify it. However if the country stays outside the treaty, it will lose access to EU funds and will not receive a second bailout should it need one.

Meanwhile, thousands of workers across Europe are protesting at cuts in pensions and wages, demanding that measures to promote growth be taken instead. Mass protests have taken place in Spain, France, the Czech Republic, Belgium and Greece.

The latter has probably suffered the most from the severe austerity measures. This week, the Greek government introduced a 22 per cent cut in the minimum wage, further slashed benefits and pensions, and cut state expenditure on healthcare and medicines in order to secure EU financial help.

For their part, EU leaders are optimistic about new policies. European Commission President Jose Manuel Barroso said on Wednesday that the measures taken to date, including a deal to cut Greece’s private sector debt by about 100 billion euros, will pave the way out of Europe’s debt crisis.

"I think we may have the conditions now to start changing perspectives," said Jose Manuel Barroso. "We now need to invest as much in getting Europe back into growth as we are currently investing in getting Europe out of the crisis."

The EC chief added that Greece’s prospects also look promising, despite the imposition of massive budget cuts.

"Without being complacent, I think we can begin to be confident that we are laying the conditions to increase the growth potential for Greece, if we stay the course," he said. "Regarding Europe in general, while our forecasts are for a mild recession this year, the interim economic forecast also points to the return to growth in the second half of the year."

­Marta Andreasen, an MEP from the UK Independence Party, thinks EU leaders are responsible for Greece's current situation.

“It is the European commission to blame, because they did not control how they [Greece] were using their money,” she told RT.

As for now, Andreasen is certain that further austerity measures are not the answer for the country.

“The only way out for them is to grow their tourism, for which they will need to devalue their currency,”
she asserts.