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Turmoil continues throughout the Eurozone, though various aspects of the zone's monetary policy going forward seem to be coming into focus. As Angela Merkel and Nicolas Sarkozy met on Monday to draft an ultimatum to the rest of the Eurozone: accept that a governing authority will have some influence on your countries monetary and fiscal policies or leave the Eurozone. Though it would take someone with a masters in finance to disentangle the interplay of factors that have brought us to this point, reviewing the intricate details and economic minutiae that fill out the present, somewhat nervewracking equation for the maintenance of fiscal union in the Eurozone, the broad strokes of the dilemma can be easily understood by any of our readers. Greece is in the most trouble, needing constant injections of cash to keep its economy from folding completely while France and Germany are leading the charge in the European Union to stabilize the region's highly interconnected economies. At the EU Summit on Dec. 9th, leaders will be meeting to discuss possible solutions to the continent's financial woes, establishing criteria by which countries that borrow money must abide and, potentially, establishing methods to ensure that each nation follows the path to recovery. Greece In early 2000, Greece had a strong economy and took advantage of its position by running a high deficit, with much of its money being spent on defense. Because the country's two main industries--shipping and tourism--are easily affected by changes to the business cycle, the economic falls in the late 2000s hit Greece harder than most, resulting in a bailout from the IMF in April of 2010. Following Greece's agreement to austerity measures, including spending cuts and increased taxes, the country was approved for further IMF loans, though the measures also prompted Greek citizens to protest the changes. The severe troubles experienced by Greece weakened the Euro and signaled the beginning of a cascading failure in the European economy, resulting in trouble for other nations such as Ireland, Portugal, Italy, Spain and Belgium. Germany and France The German chancellor, Angela Merkel, and French President, Nicolas Sarkozy, met on Monday to discuss ways to restore confidence in the Euro and prevent its collapse. They're currently backing a proposed EU treaty that they hope will alleviate the financial crisis and strengthen their shared currency. Sarkozy stated, "The goal that we have with the chancellor is for an agreement to have been negotiated and concluded between the 17 members of the Eurozone in March, because we must move quickly." The treaty would either be among the entire European Union or the 17 members of the Eurozone with the other EU members voluntarily signing and would impose sanctions on members whose deficits rise above 3% of their GDP. They propose that the European Court of Justice be tasked with holding nations to the deficit rules, though it would not be allowed to declare budgets null and void. Sanctions would automatically be imposed on countries that breached their budget deficit limits. If the treaty is successful, it would eliminate the need for further bailouts for struggling economies and force members of the Eurozone to live within their means and get back on their feet.
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