Tough Fiscal Rules Part of New European Union Pact

Response to sovereign debt crisis

In response to the sovereign debt crisis, European leaders are drafting a set of tough new fiscal rules designed to ensure that what is happening in Greece doesn’t happen again in the future to threaten the euro.

The new financial treaty includes tough deficit restrictions, as well as an automatic mechanism to be triggered in the event that a country deviates from the acceptable levels. This is designed to keep member countries in line, and it is designed to restore confidence in the euro — a confidence that has been shaken by a series of sovereign debt crises.

It remains to be seen whether the new financial treaty will be accepted, and whether it can restore confidence in the ailing euro which, for today, is lower. 

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