European countries with deficits exceeding 60 per cent of their GDP face the threat of swift sanctions under laws passed yesterday by the European Parliament.
The legislative body voted in Strasbourg, France, to toughen fiscal penalties on nations that vastly overspend their budgets. The vote is part of the continent's regulatory response to its ballooning debt crisis and comes as Greece, with debts far in excess of its GDP, seeks more aid to avoid a default next month.
"This is a crucial pillar to prevent future crises by establishing semi-automatic sanctions for countries that ignore the rules," said Corien Wortmann-Kool, a Dutch member who played a leading role in crafting the tighter rules, according to a Bloomberg News report.
For the moment, though, much of Europe's attention remains centred on a more immediate concern: staving off a Greek default. Greece late on Tuesday approved a controversial property tax to appease IMF and European authorities casting a sceptical eye over its finances as it seeks another Ä8 billion (Dh39.99bn) lifeline. Facing possible bankruptcy next month, Greece needs more aid from the so-called "troika" of the IMF, EU and European Central Bank.
Auditors for the troika are returning to Greece today to assess the situation, an EU spokesman said yesterday. But while the Greek parliament's vote for a new property tax has convinced European leaders that the country is serious about increasing its revenue and curbing spending, many Greeks see it as a raw deal.
Those who do not pay the tax could reportedly have their electricity cut off, a prospect that has stoked already simmering public anger at government cutbacks.
Angela Merkel, the German chancellor, was quick to back Greece's efforts and pledged to provide whatever help Athens needed. She said Greece was "ready to meet the conditions" set by the troika for further aid.
"We want a strong Greece in the euro area, and Germany is ready to offer all kinds of help that is needed," Mrs Merkel said after the vote, according to Bloomberg News.
As European leaders try to shore up support for Greece, top US officials have recently been sounding the alarm, saying leaders in Europe must avert an economic collapse that could send the world into recession only three years after the onset of the last financial crisis.
Barack Obama, the US president, said this week that Europe's actions to stem the sovereign-debt crisis, which has also claimed Italy, Portugal and Ireland as victims, "haven't been quite as quick as they need to be".
In another test of Europe's resolve, parliaments in the EU are voting this week on whether to increase funding for the European Financial Stability Fund, an entity created to assist troubled countries. Most of the legislatures have approved the proposal, but Germany is voting today in what is expected to be in effect a referendum on Mrs Merkel's response to the crisis.