Europe pact: Members must balance budgets or suffer sanctions
European leaders signed a fiscal pact that would enforce balanced budget among member states. Leaders also pledged to promote growth. Members must still ratify the pact.
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Mr. Schmeiding, the economist, echoed that sentiment, saying the EU must target more growth measures. "I don’t think they got the mix quite right yet," he says. "There is still too much focus on austerity."Skip to next paragraph
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The latest figures from Europe are cause for concern. Unemployment is now averaging 10 percent across the Continent, with more than 23 million people in the European Union out of a job.
Spain’s economy shrunk by 0.3 percent in the fourth quarter of last year. Nearly a quarter of the working population there is out of a job, and youth unemployment is close to 50 percent. In Italy, Portugal, and Greece 30 percent of young people are looking for work.
“The job situation in Europe is very serious,” says Raymond Torres from the International Labor Organisation (ILO) in Geneva. “After several months of improvement we are seeing an increase in unemployment again. Clearly enterprises do not believe the crisis is going to be over any time soon.”
If any reminder was needed that austerity measures are unpopular, EU leaders on their way to Brussels were greeted by a national strike in Belgium. Trade unions protested against plans to raise the retirement age. Trains and buses stood still, the country’s main airport was closed, so in order to get to the summit the politicians had to land at an army airbase.
The meeting also approved the installation of a new, permanent bailout fund, the European Stability Mechanism (ESM), with a capacity of €500 billion ($659 billion), starting in July 2012.
One glaring omission on the summit agenda was Greece. The country needs money out of a second bailout package worth €130 billion ($171 billion) very soon in order to pay back debt due in March – otherwise it defaults. But this aid won’t come unless Greece strikes a deal with its private creditors on a haircut – a write-off of Greek sovereign debt of at least 50 percent. Negotiations on the haircut have been dragging on for months and are reported to be close to a deal – but not quite there yet.
Plans aired before the summit by the German finance ministry to impose budgetary control on Greece through a special commissioner were dropped quickly when they met with almost universal opposition from European leaders. “It’s a debate we shouldn’t be having,” said Ms. Merkel.
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